Unfortunately I am unable to qualify for traditional financing until I have 2 years tax returns in the same industry (January 2016). 

In my opinion, a traditional deal set up like this is a formula to fail.  

Since this deal took no skin off my back, my plan for the next year is to grab another 4-12 unit with either seller or traditional financing next Jan/Feb, then when I'm eligible to use my VA loan again in May '16, I'll refi (or not) and use my remaining ~$160k or so in eligibility to purchase another 2-4 unit to live in for 0 down.

I recently transferred my Traditional IRA to a SD IRA Custodian.  

I'm just passing along information that provides an overall perspective on parts of town that, regardless of your first-hand experiences, are traditionally not very good parts of town.  

Due to my Real Estate biz I will NOT qualify for a traditional mortgage UNTIL I have 1 year in the business in FL.

Is there anything wrong with this process instead of doing a traditional closing with a title company?

We are planning our first investment to be traditional mortgage to get our feet wet and gain a solid grasp on that process.

My theory is that the risk of losing the $100 just doesn't outweigh the cost of getting title insurance and going the traditional route. 

And at the end of the day you received non-taxable cash in the form of additional debt.Your source of financing whether it is a bank, traditional refi lender or the former owner would be irrelevant.