Leaky IMP - suggestions?

I (my mechanic) finally completed engine work (rebuilt heads, new manifolds, risers) on my 1990 IMP Europa 205.We dropped it in the water and it runs great BUT, were getting water coming in pretty quickly from somewhere toward the stern, seems to be below the down tubes, but its hard to see with the engine in the way. We can hear it begin to take on water when were in about half way up where the out drive connects to the hull. We pulled the out drive because we thought it may be a gasket, but all looks OK. Now my mechanic wants to pull the engine so we can see where the water is coming in from. Does anyone have any suggestions on where the leak may be coming from or if pulling the engine sounds reasonable? I’m just about out of $$ so I’m hoping this wont be much more cash to fix. Any help would be appreciated.