This will not totally eliminate risk, but it will mitigate it. 

Extension risk is mitigated by most stuff we tend to buy and discuss here on BP as it is at a discount.

If you need another term, you need to separate materials and labor prices (not sure your contractor is willing to do it), 100% materials and if there is an additional man-hour used for special installation, then it will be up to you how you would mitigate that (i.e. if he wants a Jacuzzi instead of a tub, and you already installed the frame, then he backs out, you need to mitigate that too).

They are trying to mitigate their risk as much as possible.

My counter to theirs will be $175kwell steve the "banker" title was the closest to what i do..i'm an underwriter in the Loss Mitigation department

This will mitigate problems later or if you need to evict.Also, before you raise all rents at the same time and face a mass exodus resulting in no income:-Raise the rents in a staggered schedule, so not all units are vacant at the same time.

If the properties can debt service a million dollar loan at 12% then the savings at 6% should allow you to build up sufficient reserves where you can weather any bumps in the road thus mitigating the risks that come with a recourse loan.

As you can see there may be some mitigating factors which allow you to exceed one or both numbers.

My business model for several decades involved litigation and mitigation of some of the craziest cases, both off the radar and high profiles, that you can imagine.A court of equity does not always rule what's fair, but what upon what is presented before the court and the bench officer attempts to interpret, apply statutes and prior rulings. 

Middle Class Millonaire Upper Class Millionaire 1) Making sure your heirs are taken care of :                   66.9%         93.6% 2) Having adequate medical insurance:                           78.1%         76.4% 3) Having enough money for retirement:                          87.3%         53% 4) Paying for children education (529 etc)                        65.2%         28.6% 5) Losing your job or business                                          48.4 %       30.5% 6) Taking care of parents                                                   38.4%        16.1% 7) Mitigating income taxes                                                 90.1%        77.3%8) Mitigating estate taxes                                                   21.7%        81.3% 9) Mitigating capital gains taxes                                         27.1%       58.5%