The investor either gets a loan or buys the property in cash.

This setup adds an extra layer of anonymity and protection.

I mean even if the IRR is trash and the cash on cash returns don't come back as promised. 

.- at year 7 if value appreciated a lot, can i do a HELOC on it and use that HELOC to pay off the balloon - probably not due to lien being secondary etc on helocYes on the HELOC, but it would probably be easier just to refi and pay off the seller, and cash out more money too.Hope that helps and good luck!

Then sell on the side, extra pipeline for revenue. 

Or sell using the 1031 exchange along with a partial 121 primary residence exemption There is a way you could take advantage of the 121 primary residence exclusion allowing you to take the first $250k of the gain tax free ($500k if married) and qualify for a 1031 exchange.Say you purchase a property as your primary residence (house hack extra rooms for extra income) and lived there for two years while stationed there.

Purchase price: $250,000 Cash invested: $75,000 7 bedroom Padsplit property at 93% occupancy What made you interested in investing in this type of deal?

Conventional loans will require 12 months seasoning for cash out and are usually capped at 75% LTV 2.

And you have taken the extra 150 hours required for the broker's license? 

Congrats and knock out that extra debt you accumulated so you can save up for STR #2!