Once you get your 5+ unit, then you could form your LLC (if you haven't done so already) and buy it under the LLC, let it season and then turn around and refinance your earlier properties down the the road into the LLC, at that point you would have more to loose (more properties) and it may be a smart idea then.

The room is vacant since then and I am already loosing a month's rent. 

What I've loosely gathered is below, can anyone tell me if these figures are in the ballpark?

Tell the owner he appears to be right about loosing the property in a bankruptcy but the new owner has left the  the title to the property in a mess and you'd like his help clearing it up. 

you snooze you loose. and some markets are much hotter than others.Like Vegas right now is super hot.Portlandia is strong but inventory stands still for a month or so.. but a smokin great deal in almost any city is gone in hours.

Personally, I would do both because if the stair nose trim comes loose there's nothing to keep the floating floor from skipping away.

At this point we don't know what to do because maybe we are afraid of loosing what we have built so far in savings and equity, but also because we have a new member of the family that we want to make sure he has a good future.

You can loose a year of cashflow very quickly to unexpected roof repairs, furnace or air conditioning replacements or even exterior painting for a random C of O inspection or a shocker come tax time.

As previously pointed out, you then loose all leverage.

I routinely get disappointed by lenders but I never loose site of the value they provide.