That's two loans to purchase one house and is a great way to over-leverage.I also disagree with selling.

The biggest thing that sticks out to me is, if the property is in good enough shape to qualify for a conventional mortgage, there is a larger pool of potential buyer, so there may not need to be enough spread between purchase and ARV.

What is the total purchase price of the property?

Quote from @Richard Hoyte: What is a good and or acceptable amount of money to have saved up before buying your first rental property I'm aware this can vary depending on the state/area but is there a rule of thumbThank you ahead of time  Hello Richard, Your down payment amount will have a lot to do with this.If you are going with the minimum downpayment of 3 - 3.5% , you'll want to have at least a total of 10% of the purchase price (to also account for closing costs) + 6 months in reserves.

Why do you think purchase contracts are so long and have such small print?

We have helped quite a few military members purchase homes and then transition into SFR when they relocate.

If you need the capital from a rental for a primary home purchase and you wanted to side step cap gains, then the approach would be to refinance the rental not sell it. 

--So, S8 doesn't solve everything and has its own challengesRead more below (copy & paste):Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

I am looking into purchasing a plot of land somewhere around my state of Illinois to give myself leverage and motivation to develop it.

So, I am in the middle of purchasing a co-op unit for a flip.