Would it be possible to offer to assume the loan from him to avoid getting a traditional loan? 

Tom Shepard I utilized the same strategy as you (paid cash then wanted to pull money out) of my first several property purchases, and came across a program called the Fannie Mae Delayed Financing Program that allows cash buyers to pull equity out without the traditional 6 month seasoning requirement.

I'm a newer RE investor w/ a primary residence in Berkeley, a vacation rental in Yosemite, and a traditional rental in Merced.  

@Josh Reynolds I have two types of bird dogs.1) The traditional way where they drive around and look for houses, take pictures, etc.

As is a really good deal not getting scooped up right away if its listed in this environment.I don't know of any traditional lenders doing loans on gut rehabs, especially to someone that's never done one.

I believe with traditional turnkey companies, since you're not funding the rehab, they typically start the rehab before they have a buyer for the property, so by the time a buyer puts the property under contract and closes through conventional loans, which takes another month, the rehab is pretty much complete at that point with a tenant ready to move in.

The only "traditional" lender you might be able to find that would do for a lower downpayment, would be a local credit union that keeps loans in-house... although that is rather unlikely.You could always explore other kinds of funding, like seller financing.

I also found a source that stated that Creative investing is much more stable than Traditional because Traditional investors now more than ever have much more competition because of Hedge Funds and other institutions that heavily invest in real estate while the Creative approach is driven only by motivated sellers. 

By looking at houses that turned off the traditional buyer (ugly, needed work, bad ad, foreclosure, short sale, etc).

I currently have one for 3 of my properties, not counting my traditional, owner occupied, first house.