But didn't state what will be default.

Most of my workouts default.

However, reading the story of someone who didn't default and had their loan foreclosed...

I'd like to do this so that I'm safe from the seller defaulting on the loan & any other pit falls.

Disclaimer: I am not a lawyer but I am at a Holiday InnThe way I see this is that you're not increasing rent because they're defaulting on their renewal, so it is now a new M2M lease so you can do whatever you want.

What they are seeing in all of the contracts so far is that if a renter that the Prop Mgmt company places ever buys the house, then the PM company receives a full 6% commission since there is no buyer's agent and they are the default sellers agent. 

If you put a computer in charge, it's 100% just going to default to "most conservative" IE "what are we 100% sure will NOT create a loan buy-back in the secondary market?"

Numbers are too tight for anything else and with reverse mortgage if they leave the house it’s in default so Sub-2 is out.

He'd only need $300k so he can put up the $500k 401k and should he default, he would cash it out and net $275,000 on his 401k. 

A lot to consider here, of course check with local laws, but in general, if you are trying to avoid three vacancies at once: if there are no leases, the tenants will have default rights in your state, find out what those are.