Here again this is my methodology, I'll never state that's it's right but it has provides me leverage to account for unforeseen expense after closings. 

You MAY qualify for a reduced exclusion under Pub 523 if the move was for work, health or unforeseen circumstances.  

@Derrick Aragon Yes I went overbudget on my renovation due to some unforeseen issues that the inspector did not catch.

Making sure to keep record of payments on my end as proof I'm making the payments in the event any unforeseen circumstances arise in the future.Aside from that, I'm assuming I could get a standard note online and include the specific terms, payments, interest, and or balloon correct?

If I were you I would pay yourself extra, say $500/month in rent (don't actually pay this for accounting purposes, just set $300 aside) to build up a reserve which you should have anyway for unforeseen expenses.

One doesn’t need to resort to half-baked ideas from fly-by-night operators to be successful.Barring unforeseen circumstances and/or adverse life events, it is very hard to not be, at least, comfortably middle-class in the US. 

This is why we try to keep about $100,000 in cash available as a safety net to take care of any unforeseen issues.

They mentioned they had unforeseen monetary issues come up. 

It’s awesome that you are saving for the down payment, but make sure you are also saving for unforeseen expenses (e.g. furnace goes out in Year 1)6.

For example the property throws off great cash flow and has been stable for years but all of a sudden the property needs 50,000 injection due to an unforeseen larger repair.