Also, how much profit would you have to give up for the discounted contractor rate?

Profit in real estate comes from cash flow, appreciation, and principal reduction...cash flow is only one component of it. 

When we close we will end up with about a bit over 5k profit on the house.

My end-goal would be to learn the ins and outs of the industry in order to earn passive income and steadily do more and more profitable and complex deals.

With the above mentioned I am wondering if it would be best for me to buy a single family home to live in and rehab cosmetic items within the first year and then sell it within 1-2 years and use the profits for a down payment on an owner occupied property.

The rehab is where all the money is made, or rather, buying distressed leaves enough spread to rehab and make some profit.

In summary:1) I am fine owning the property, but can let it go for below market value and still make a good profit.

He also thinks being close to a ski mountain is important but unsure if you could be profitable if not near a ski mountain. 

What is the smart decision in the end that may cost less and have a greater profit?

I am looking to take this profit and do another mailing strategy but would love some impute.