He’s willing to “gift” me the 20% down payment and to get the loan and then owner finance that 20% over 3 years to pay him back.

I'm building my rental portfolio anyways, just thought this would be the easiest way to get them comfortable and me with some secure income without the 45 day timeframe of searching for another property.

Changing title could trigger gift tax filing requirement.

Seems like your best (or easiest) option is to just lower the rental rate if you can't get anyone to rent at your current rate.

It is definitely opening me to a lot of the different stories and avenues house hacking being the one I found would be cheapest and easiest to get my feet wet and learning by doing.

However let's say he is a stellar tenant you could give him a $50 restuarant gift card to keep the peace. 

Once again, I really appreciate the feedback. lots of ways to structure it, seems like the easiest for you would be a simple loan.TALK TO THEM and try to find solutions. asking for 10 (probably best to make it 15 for overages) for a ~12 month loan @ 10ish% isn't a bad deal. use a longer amortization or interest only so you can make payments back to them immediately. if the deal is as you say, there should be little worry about a refi and in 6 months you can pay them in full. 

Hi Jason,You have spoken to one resident who seems to be saying they are going to abandon the property.Since you have a heads up on this, it might be wise to speak to the other resident (via phone) and see if he intends to abandon it also, or if he intends on staying.Also, I'd avoid the drama of the whole situation and just say she said she is leaving (without going into details of the she said/he said thing) and you're just calling because you wanted to know his plans, without mentioning any personal accusations she has made.Maybe he will stay and your problem is solved.But sticking to business only in the conversation will probably be the easiest rout.Resident drama happens all the time.Good Luck!

It sounds like it will be easiest to open a CA LLC if i'd like to start building credit. 

Since it is zoned duplex, it would be easiest to use that space for storage.