That is 245,000 in equity. 

If you have done proper analysis and the house will appraise at $72k (it really should appraise above, you want to CREATE value) then a 30 year mortgage, 20% down (take out $57,600 in equity), fixed at 4%, the monthly payment should be ~$277 based on a simple payment calculation in excel.Taxes and insurance should be low on a property that is small and recently renovated (CAPEX shouldn't occur in 5-7 year span if your rehab is done properly).

I was thinking about the possibility of offering seller financing but I still have a mortgage on the house...I do have about 290K in equity though and think we both benefit if I'm making close to 5% interest and he's able to purchase the house. 

Must pay back in equal payments or all at once (typically).

Yes you are getting $700 a month cash-flow, which is awesome, but you also have $110,000 in equity that is making you no money at all.

I don't have a ton of cash, but I do have about $150k in equity in the first house so that may be a potential source of funds to finance some deals.

Meaning if you only have access to $20,000 in equity, I wouldn't spend the $1500-2000 on a re-fi to access it, instead I would do the line of credit at considerably cheaper.

Everyone gets their $1000 back but also $2000 more in equity for the next project.

I work in syndicated real estate and have placed many clients into Delaware Statutory Trusts in that market in 2015, but I also removed one property from our approved list of DSTs at the time and pulled $2M in equity into other investments after I visited it (which virtually no one in my industry does).

Here are a few thoughts to consider:If your ARV is correct and your repair estimate is accurate, it's worth asking why the owners are prepared to forsake $40K in equity just to avoid a $6K expense.