It's a big red flag in my opinion If he can't clearly answer the question.This is outside of your question, but in Massachusetts a business cannot represent itself in any court besides small claims court.

Will I make regular income or passive income?

He enlisted a lawyer who claims I am violating NJ anti-eviction law by not accepting the signed lease.Does NJ law support this?

Many claim they are two of the best zip codes to flip right now.

My question was pretty much,  is there ACTUALLY oodles of people out there looking for private funds from people like me, like BP podcast claims. 

It is almost like they atre trying to add vague terms to allow some way to claim the escrow.I can pull the plug and use my lender to pull the plug immediately and not even allow the dispute process to happen.

He has claimed that he spoke with his loan attorney and if I wanted to pay off his last 6 months that he would transfer the title of the house and mortgage to my name.

So, if the parties negotiate with each other, it is always an element of negotiations to say to the other party something along the lines of, "You might be right in what you are claiming that you owe me only $XX, but you will have to hire a lawyer to find out, so save the legal fees and pay me $XX plus $YY, and it will still be cheaper than paying the lawyers." 

Water/sewer service in my area can be liened by the jurisdiction for non-payment, so I still pay that myself, but take the past 12 months' average, knock off a small bit and add it into their lease on top of regular rent. 

The regular FHA loan program has stringent condition requirements and they do detailed inspections.