Have the owner deed the entire property over to the current tenant, have the current tenant catch up the default if he agrees since he will now be more vested in the property, create a 2nd deed of trust payable to the owner, bridging the gap between what is owed on the property and its current value.

What are the top 3 scams found in the arena of bridge lending?

you may want to establish credit with a community bank that will give you a LOC to bridge the payment gaps.I funded a start up flagging companies a few years ago.. they had that issue..

Trying to bridge the gap, I have looked at several neighborhoods along my commute from NYC to CT, but I found that since I am not from these neighborhoods, I am at a disadvantage.

Any non-bank loan from a private money source is considered a private money loan, including bridge loans, hard money loans, and all types of alternative financing.

It seems like some people here have somehow received conventional loans with 5% down which is a lot different than what I have been reading elsewhere.If this isnt possible, would it be better to try to enter real estate as a hard money/bridge lender in the short term in order to grow the portion of my funds I could use for downpayment?

It's a lesson learned, and all under the bridge now. 

The opportunity may be a very good match for you, BUT if it is with the wrong person, it will not yield the result you wish for.I would gracefully bow out of the situation without burning bridges.

Your thought of the seller financing your down payment won't fly with a bank or lender, there is no skin in the game.Look into a bridge loan using your 4plex as collateral for the down and repairs, or a blanket loan using both properties to fund your deal as you have about 60K in equity available at an 80% LTV

Hal20% vacancy it is unstable you would need bridge financing until you bridge over from unstable to stable >85% occupied.Expenses should be 35% of gross income for a prop this size.