Hi everyone!
I’m currently under contract on my first commercial property in Tennessee—3 duplexes on the same lot—and I’ve run into a snag. One of the duplexes has some foundation issues, and one of its units needs subfloor repairs/new flooring due to moisture damage. The total cost to fix these issues and encapsulate the crawlspace is $20–25K. The other five units are currently rented at market rates.

I'm using a DSCR loan, and my lender requires the property manager to confirm there's no deferred maintenance before closing. The PM is willing to sign off—but only after these repairs are completed.

Here's the issue: the sellers claim they don't have the funds to cover the repairs. My lender is recommending I use a hard money rehab loan to complete the work, then refinance into the DSCR loan afterward. But with over $15K in added fees, closing costs, and higher interest, it seems excessive for just $20–25K in repairs.

The seller offered to let me pay for the repairs upfront and credit me back at closing. I’m hesitant because I don’t know what protection I’d have if something derails the closing and I’m left out of pocket.

Has anyone dealt with a similar situation? I’m looking for creative ways to make this work without going the hard money route—and ideally while protecting myself if the deal falls through. Any advice or suggestions would be greatly appreciated!

Thanks in advance!