@Donna Ragan
Option 1 really makes little sense for a contractor as he can make more money and incur less risk by simply doing what he is in business to do.
Option 2 is problematic in that you would essentially be acting as the General Contractor for the project, yet it may not be legal for you to do so. I assume you intend to pull building permits for the work. Most states have laws prohibiting property owners from acting as their own GC, unless they intend to occupy the house themselves for a period of time (typically 1 year) upon the completion of the work. You may want to inquire with your local building department regarding this.
A 3rd option would be to simply hire a licensed GC to perform the work. You may end up making a little less but you will have a solid renovation, with the work professionally done and fewer hassles and headaches.
It's true: you have to find and select a good contractor but if you intend to flip houses regularly, having one will prove to be invaluable.