If it's a deal that is in a very very desirable location and has tons of built in equity and appreciation, I would be totally good with negative cash flow for Y1 and Y2.

1st, lets talk about equity in your homes.

@Shawn Questa I agree with you that there could be some opportunity here, but personally, with that little equity in the property, I'd wait for the pre-foreclosure process to start and  perhaps you can do a short sale (though I don't know the details on how that's handled in TX).

My suggestion if your goal is to free up some equity to use for another purchase - start small with the single family home with a cash out refinance.

So i put in an offer for 10% down conventional loan, $530,000 with 10k back to me for closing costs and it was accepted right away.

I might have a private lender referral that does rural loans in Mid-MO if you're interested. 

So they often will reduce the leverage of the loan (getting 65% instead of 75%) or deny it (which isn't as likely). 

we have to have pre sales my bank will only give me a certain amount of spec loans but unlimited amount of pre sales. its the only way to keep velocity when you have a larger project like us ( 90 homes) We have been blessed no questions about it.. we made some critical decisions when we started that now look like genius moves :)

Based on the numbers seems like it was a straight forward conventional loan...any challenges?

If I got a home equity loan for Property 1 and used the proceeds as downpayment for Property 2 and then got a 2nd loan for the remaining 75% purchase price for Property 2, when I sell Property 2, can I use the Property 1 loan as part of the cost basis for computing Property 2 capital gains?