It would be best if he calls the city and asks them to turn it in (although it is already on) in order to establish service for 2 reasons: (1) He's going to need to have the water on for the when the property gets inspected (banks won't loan unless everything is proven to be working) and (2) Right now the city could charge him with theft of water by turning the water back on himself (well, really the contractor did it but the city does not care). 

If the contractor doesnt do this he will hear " I am waiting on my draw "  " I will catch up to you on friday "  " I am having having problems with my bank "   etc etc . 

For every 100 TK providers I'd say 99 are setting you up to fail.

Let me know if either of those two are booked and I can dredge my memory banks for some other good folks!

Would it be better to try and put a business plan together and pitch to private investors or a bank? 

@Michael Stanley NinoHaving 40k for a downpayment is a great start but remember for a conventional loan banks will look at Credit Score , reserves as well..

@Sherrod Mcgowan-green My paycheck is automatically deposited and split between 2 bank accounts.

Major appliances can fail. 

Can the bank go after him for the existing mortgage or will he just never be able to take a loan out against the property with the existing lien? 

Have these rules and standards ever failed you?