I am not an expert on all of the securities law issues, but I have seen gifting of interests in syndication deals to a limited partner's children (cannot confirm that they were minors). 

If I become a Co-Borrower on a loan secured by a property that I intend to exchange into, will that prevent me using the 1031 Exchange?

The DOT secures the mortgage/note and outlines the foreclosure process in Texas. 

You can also try Pierce Redmond at Security Mortgage Group (http://www.securitymortgagegroup.net/).  

There are so many buyers (aka borrowers) looking to buy investment properties outside of their market but are struggling to secure commercial real estate financing because banks are not interested unless the borrower is in market with the property. 

A hidden asset may be found, but a protected asset is a more secure one.

Wanted feedback from the you guys on what's the best way to secure my investment and if any of you have done this what advice can you provide?

YOU are the one who is entitled to the security deposit, as YOU are the one who will have to pay for any damages.

This was super surprising to me, since the loan is way more "secure" for the lender AFAIK.

Either process could work, but if he is securing his interest with a lien on the property you are purchasing, then he should most likely send the money directly to the title company (and have you sign a note and mortgage or deed of trust).