I won't lose sleep over that but making a bad deal I would lose a lot of sleep. 

Their only risk is losing their cash when markets drop.

Im already paying someone elses money and losing opportunity so why not take a risk at being in the winning side of things?

So he has to pad the difference or lose deposit.I suggest you take it off the market possibly use an agent who is well versed to get your property sold quickly.

Worst case scenrio you lose a relationship and $25k.Do yourself a favor and stay out of it. 

By the way, after vacancy and repairs you won’t make that $100 a month anyways, you’ll be losing money.

You are considered to be disqualified person to your 401k and the IRS rules prohibit any transaction between qualified plan and disqualified person.Taking early distribution not only will be subject to penalties, but also to taxation on both state and federal levels, as a result you may end up losing 40-50% of your 401k balance, not a wise thing to do.

So, if I were to sell it by 2020 (within 3 years of turning it into rental), I pocket the entire capital gains on the property (roughly $65k) but I will instantly lose my $750/monthly cash flow from rent as well as depreciation I each year.

You're not only losing money from cash flow(-), but you're losing potential profits from an investment that wasn't taking away your profits...and your seed money at the same time.Those profitable returns you're losing, is (should be) exponential. 

There is no guarantee the price of the home will sit still so you could gain or lose there too.Just some thoughts.