This sounds like a thoughtful plan, but there are a few things to keep in mind.First, while you won’t be on the mortgage, you'll still be co-owner, meaning if things go south (like he defaults), the bank could come after the property, which affects your investment.

Now in purchase money states like the were we live risk of a default does not exist.. but in a State like Texas a seller could get twisted up pretty bad.

We had a borrower who first three loans did great and this fourth one is in default (we are in first).

I thought that if the defaulted mortgage was taken out before 2016 then the right of redemption was a year, but if it was after 2016 (and they had a homestead exemption) it is 6 months.

I do owe him 5k and told him the checks were ready for pickup but still no response 1- You hold that 5k until…2- Review the details in your contract, specifically Scope of Work, release payment descriptions3- Review contractor default or termination clauses or language in contract4- Review permit status with municipality, if permits were pulled.

Personal property is depreciated on a much shorter timeline than the default depreciation life of a rental property (27.5 years). 

We agreed on 5k down, 0% for 20 years.Is deed in lieu somethings that's addressed now or given as an option if they default?

I doubt the companies you mentioned above (both good) probably would not go to that extent, but they could.I have had borrowers or lenders (buyers and sellers) die, get divorced, go bankrupt, default under every loan provision, become incapacitated and even go to prison!

If your best offer is $380k and you owe $477 and its probably now default interest at 18% let it go to foreclosure. 

The loss given default on 2nd's can be much, much higher than that of 1st's.