What are your objectives?

My object is to appreciate the second property, doing the floors, carpets, and most of the work myself.

Objective is to is to increase cash flow.

Then they buy the house, they pay to rehab it, etc.In scenario #1, you're paying a marked up value for a property, but it's already done for you.In scenario #2, you're paying cost for the property and rehab, but you do need to factor in extra time/risk for the rehab.So neither is inherently "bad" or "better", it's more about your goals and objectives.

I object to the income tax system.

Personally I would invest in Value Add Storage Properties but what you do will depend on your area of expertise, interest and as importantly your investment objectives. 

You are going to have a difficult time building trust and finding someone to work with you if the main objective is to beat down cost. 

Our objective is to purchase at least 1 x 2-4 unit property in the next year and to pursue larger multi-family deals to follow.  

If you do and he objects and pushes the deal, I guarantee you, you will lose.

Point being, price overcomes all objections.