In addition, there is a monthly CapEx reserves budget I set after the property is stable.

Then you need a pool , staff to take reservations and run the store and do maintenance .

This was after I had already confirmed with him the day before.

If there is considerable equity in the property, this situation can be quite profitable, by acquiring the seller's interest and subsequently foreclosing on the non-selling co-owner for his/her unpaid portion of the expenses.It works like this, do a title search to confirm who has how much interest in the house, and get a good inspection to see what maintenance is currently required. 

With management and proper vacancy/capex/repairs reserves, I'm still unsure how people make a profit on a 1% on SFH's (unless you're doing a BRRRR where you have little to no cash left in the deal after refi).   1% is attainable in central/northern FL. 

If not and you're just playing with terms, my "hunch" is to agree with @Scott Jensen ... if you're very comfortable to put $15,000 into making this happen ($10k cash you need to bring to the table plus $5k closing costs) without sacrificing reserves etc, then perhaps just pay the $15k on the smaller loan. 

I confirmed with my CPA that this is okay, but everything I look up is contradictory regarding partnership returns needing form 1065.Thanks,Trevor

Here are my costsMaintenance reserve, 5%......$65Vacancy 5% .............................$65Management 10%...................$130Property Tax............................$114  (Jefferson County records show this as half this but realtor mentioned this number, getting clarification now)Insurance..................................$65Anticipating some capex for a new driveway and repairing the crawlspace which had standing water in it.Seems like a good deal otherwise.

Do you have reserves for repairs?

Lenders are going to want you to have some reserves as well, so keep that in mind.