We almost went with a loan that we have to pay all the cost upfront and then get reimbursed on the back end and that was just not something we were willing to do.

I do not understand your remark as related to the DSCR loan.  2 ADUs are not allowed by f/f conventional financing but is not always enforced.Fortunately if you stay with the current tenant without a refi, by the time you pay principle it is likely the rent will have increased enough to absorb the increase mortgage payment. 

Keep in mind you will probably have a deductable to pay first.

Determine at what percentage of completion you'll pay for work done. i.e.

Pay off debt .

Are you looking to pay off the hard money loan, fund another investment, or cover property improvements?

The last one told me I'd likely pay a small fortune for this policy. 

Quote from @Leeling Chew: It doesn't matter who pays the bills.

If I identified the offender, I would probably bill them back for the wasted water and when they didn't pay evict them, or non-renew them if their lease was near the end because that is simpler. 

Now, you need to figure out how to find deals and pay for them.