That doesn't mean it isn't a good strategy - if the property still produces healthy cash flow after expenses (which includes future capital needs if you've deferred such), at a minimum you could be rolling the cash flow either back into the home to own it outright or using those funds to prepare for your next purchase. 

You must document the use of the money to prevent a claim that you made a consumer-purpose loan.

Certainly didn't make it's way into the hands of any consumers that's for sure.

This negative position can consume years of cash flow to recover.

Early on I replied on various contractors (unsuccessfully) due to my (then) full time, very time consuming job.

Early on I replied on various contractors (unsuccessfully) due to my (then) full time, very time consuming job.

In some places, creating an LLC is time consuming and expensive.

There are all kinds of potential bad outcomes of this for sellers.Most businesses and consumers should be striving for efficiency and transparency. 

Like Chris, I'm not brave enough to buy a consumer loan in Chicago.

I have flipped four houses to date and typically look for properties that guarantee a healthy margin.