I will keep you posted as to what happens and how things work out!

This one might workout but over time you will bat less than 50% with your current approach.This is why.

I guess my question is what deal COULD I work out of it?

If you can rent a room for $400, see if you can't get him to work out a scenario where you pay him about $600 a month.

How would the risk work out on this?  

thank you, @MattM.The deal didn't work out, but I'll keep your offer in mind.

Those numbers make sense and now I see how I need the ratios to work out - you rock!

This makes sense for a fix and flip property, but how does it work out for a buy and hold rental?

I would love to still rent it, but I need to figure out a way that would work out well.

Assuming you're not in Louisville, here are some approaches you can take in your market to get into a place with less than 20% down:-Owner financing - work out terms that require small down payment with the seller-Private Equity - find somebody to partner with you, then purchase property with LLC and get commercial loan-Private Debt - find somebody to loan you the money for the entire deal or part of down payment (latter is not a great idea as you should disclose to the bank and as others mentioned this will mess up your DTI)-Hard Money - purchase distressed property with short term loan, fix up, refinance with a cashout loan.