Your description is substantially at variance with the views of the contractor, i.e., that the ammonia smell was so strong he refused to enter.

But you will have substantial equity (something like $200,000) in the property after five years if your ARV is correct. 

The end goal is to have a substantial amount of passive income as well as build equity, to have additional security for my family in case something were to ever happen to myself or my job.  

I'm not going to even bother looking at their site.....you don't get an unsecured cash line of credit for $60k without some substantial/decent financials, and a business history.....period.

My first deal had some hair on it (required substantial rehab, inherited existing tenants, required city approval to reconfigure), but was a great experience that I would do again and again!

Anyway, partner has a substantial amount of student debt (I believe $60k or so), I'm concerned how this would affect our arrangement, would I be liable for any of his debt? 

I suspect he will lose between rent .. and having to rehab it for real again 5 to 10k right out of the shoot. and to make the statement glad I had reserves. .well anyone buying a rental without substantial reserves is just a crash and burn waiting to happen especially in low end areas like this.There is a reason most TK companies of high repute refuse to work in these areas anymore.. 

The investment must be "substantial."

In a simultaneous transaction, I am entering a security agreement with the owner for a share of any profits from sale and (if applicable) rental, which is substantially more than if I charged interest on the note.

They can grow tax free and when I retire I can withdraw them tax free even though I will hopefully have substantially more income than I have today.