I am about to purchase a home in FL and take over payments, as seller just wants out.  

For owner financing I would pitch it to the owner however you would like to lay it out, or ask if they would do payments and a balloon within a few years to let you build equity and income on the property.

By the end of 5 years I hopefully have between 60-125% of my down payment back and a capital gains profit that is rolled into two new properties!

Or I was also looking for 400k house that I would be able to add value such as guest house or something else to cover the mortgage payment?

Let's rounded to $400/mo/unit to simplify the numbers.That is an income of $1600*12/yr from rent ~= $19,200Now, expenses:Maintenance: $9,600/yr (50% rule)Taxes: Around 1% ( lucky New Mexicans): $1,700/yrMortgage Payment ([email protected]%): $763/mo ~= $9,150/yrInsurance: Around $1,000/yrPossible Cashflow per Year: 19200 - 9600 - 1700 - 9150 - 1000 = (-$2,250)A negative cashflow does not look so good, but here are 2 opportunities to increment it:1) Increase rents.

You could take the property sub2 for what he owes if the 1500 cashflows at his current payment but he's not going to get 275 for it unless youand he are willing to write a note for a nominal amount now and the remainder in a ballon payment in 10 years.  

There are a lot of properties for sale - if you have the down payment, this should not be so difficult for you. 

He hasn't made any payments in over a year totaling between 20-30k behind.

My first owner financing deal, it's a duplex the owner owns free and clear no mortgage.I am wondering if I get a deed or title, (with receipt of my down payment,) or some sort of "lesser" title until I pay it off then I get the actual deed?

I'd recommend going big than going small (for you I'm guessing you are doing FHA or lower down payment as a hack).