First, you should verify his income supports the rent without her assistance.Second, you should write up a simple "Remove Tenant Addendum" that removes her from the lease, gives him complete control of the lease and responsibility for the rent and condition of the property, and that notifies her she is giving up any rights to the property or the security deposit.

The numbers are fair in my opinion but I would structure it as a secured loan and a joint venture agreement(two separate agreements).

Don't let "accreditation" or the folks selling products "only accredited investors can buy" lull you into a false sense of security. 

You could contribute enough to get the match, let's say 4% from you and your employer (8% total contributions), but your 401k loses 6% one year, resulting in growth of only 2%.During a good year, maybe it grows by 16% (=8% investment gain on your 4% contribution and 4% match).Alternatively, you could keep the entire 401k account in cash (not invested in any securities) and let it grow at the matching rate, guaranteed like a CD.If you forecast out to retirement, based on what you plan to contribute, do you anticipate that your 401k will be your primary source of retirement income? 

I could see how others like the security of a place to live for a year without fear of getting kicked out.

@Reggie Burnett Having gone through all the options you've mentioned i think your best option is using your home Equity for the deal.If you need help securing a loan using the Equity on your Home i can assist you with that just let me know.

Keep in mind you are still selling a security.

Hello Kevin,Some lenders will do a commercial line of credit secured by an investment property.

(Saved me $1000s) Prior to the deal in due diligence, Ask for all the move in inspections and photos, The Leases, and Security Deposits.

If you will just send me your bank account info, password,  DOB, Copy of your drivers license and social security number my Nigerian cousin will take care of the assignment for only $5,000