And I said, "Oh No....that's not our agreement"  So I called the Seller's Agent and she agreed with me and told me she would call me back. 

The risk is on the tenant buyer end (you doing a lease option with your tenant and prospective buyer):If I have to evict the tenant, my attorney said that because they have an option agreement, there is a claim of ownership and the case can't be heard at the district justice court.

I then compare the conservative and "real time" calculators to see what my estimated minimum/maximum cash flow could potentially be.

What I do know is that one of the many, many things signed by a buyer at closing is an agreement to keep the property insured and authorizing mortgage companies to put insurance in place and bill the owner-and those rates aren't cheap.

@Patrick Fraire I'd counter at $330k + 1-year of rent for this friend with the contingency that the friend sign a lease agreement with you, which would basically be a pre-paid 1-year lease.

My question is, do we have to file paperwork to register the partnership, or can we just document on a partnership agreement and file our respective share on our taxes?

I have a close personal relationship with the seller, so will work the option to rehab into the agreement. 

Should the two tenants make some sort of agreement together?  

The agreement was signed by us both (and actually this part no attorney was included...we just ensured it was notarized).

Does anyone have an up to date Purchase & Sale Agreement?