@Nicholas Pisano real estate investing is a long-term game, not overnight.Have seen many newbies jump in a buy several properties, then when things don't go according to their unrealistic plans, freak out and sell at a loss.A past client is doing that right now - they bought 5 properties from a high-pressure agent, hired us, micro-managed us to try to meet their unrealistic expectations, terminated us and hire another PMC to "save" their portfolio and went that didn't work out, are now selling 3 at a loss. 

Consequently, I find myself in a predicament where I cannot recover the funds already spent to proceed with the project.

She can always cash out within 3 years of placing her primary as a rental and not have much opportunity cost loss.

Hi, My house was a total loss in 2021 have been struggling with finding a builder to get the house rebuilt.

Couldn’t I sell for a loss, and pay the bank back whatever I owe them but borrow that amount?

Normally when you hear cap rates this high the expenses are not calculated correctly or certain expenses are omitted (no vacancy loss, no management fee, light on repairs etc). 

I realize I could cash in on any of the above and decrease the new mortgage in turn lowering my dti but my intention is to not face any tax losses by selling from any of those accounts before the end of year.

It won't be quick, but you can always recover in second cause.

So, if that business is showing a big loss after adding back deprecation, and other add backs for rental income, that loss (or gain) will still be  calculated  into your debt to income ratio. 

Sounds like you went over and above what was needed to confirm she was out - good for you.I believe you can go after her for the rent on the property, but if I'm not mistaken, you have a good chance of recovering 2 months worth, and not a great chance of getting any more than that.