A month 22 refi sent back 40% of my $65k while I still hold the units

First LP position I've ever taken, in a 96 unit garden style property in a midsize southeast market. I came in at $65,000. My day job is construction, so the only part of the deal I felt qualified to judge was the renovation budget, and that turned out to be the part that mattered.

The sponsor's plan was $9,800 per unit interior, 62 units to be touched over 24 months. I priced it off the scope sheet they sent when I asked. Flooring, counters, cabinet faces, appliances, paint, plus a light bathroom refresh. In my market that scope runs $11,500 to $13,000 with labor in the current environment, and I said so on the call. The sponsor's answer was that they had an in-house crew doing three properties in the same submarket and a line item of $340,000 in contingency at the deal level. I asked for the contingency number in writing and got it in the next investor package.

How it went. Interiors actually landed at $11,200 average, so the sponsor was over budget by 14% per unit and used about $190,000 of the contingency. Renovated units leased at a $215 premium against $180 underwritten, which more than covered the overage. Distributions started month 7 at 5% annualized on my capital, went to 8% at month 16.

Month 22 they refinanced out of the acquisition loan into agency debt and returned $26,000 of my $65,000. I still own the same equity percentage. So I now have $39,000 at risk earning distributions on the original $65,000 basis, which is the part that made me understand why people do this.

The part that nearly broke it: the in-house crew lost their lead superintendent in month 9 and renovations stalled for about eleven weeks. If lease-up had stalled instead of construction, the refinance timing goes away and I'm sitting in year four waiting.

What I'd keep: pricing the capex scope myself instead of accepting a per unit number, and asking for the contingency in writing.