Loan to build house -passive income?

[Julie Groth]

My funding partner is borrow the money from a bank (he's got the cash outlay of a down payment and loan costs). He will pay to buy the lot and build the new house. I'm putting the deal together and doing ALL of the work (house plans, hire builder, choose all fixtures, market for sale). We each will be paid a % of profit, plus he'll get 8% on his cash outlay.

I assume that all of his income is passive (the 8% part and the equity share part). I assume that all of mine is active income.

Correct? Do we need to put special language in our JV agreement to make sure of this?