I purchased what was an existing duplex for $48,000 and proceeded to take the entire thing to the studs and turn it into a 5 bed/3 bath home.That cost me about $130,000 total.

If you proceed, have a clear exit strategy and backup plans (e.g., ability to rent the property if you can't sell quickly).If you want to talk about private lending options feel free to contact me.Regards,Jackson

Well, the reasons given generally fall into two categories - either tax benefits through an “installment” sale or obtaining an interest rate on their capital greater than what banks are paying.In my 45+ years doing real estate deals, I’ve found maybe once that the tax argument was considered by a seller; further the “greater than bank rate” argument is completely irrelevant because - the proceeds of a property sale were never going into a bank account, at least not most of the proceeds.

He just said "now I don't feel appreciated, let's settle those favors I did you before we proceed any further" and sent me an invoice for $2K for the lost materials + time with the break-ins.Overall, the job seems to be ~80% complete but with poor quality, and I will absolutely need to hire someone else to fix his mistakes.

That means, for each and every claim they make (and they can make all kinds of claims in the initial filing,) there’d better be proof, or at least some evidence, in *their* possession.I am not an attorney, but have successfully defended myself (without a lawyer) in legal proceedings against so-called-ones.

So I would proceed with extreme caution, or not do it if I were you.

In your case, the finance charges you are currently paying will likely be less than any construction debt you originate so I would recommend first confirming with the existing lender how to release the developable parcel and then obtain all of your approvals before proceeding. 

Are you substantially better off if you proceed?

I am out of options on how to proceed.

We don't bash your stripped down, bare bones, operational stance with blind rage.