You need to take steps to mitigate the risk.

I don't think I have any knowledge to know the difference unfortunately, and don't know next steps on how to evaluate. 

Here are some practical steps you can take:First, make sure you have a clear and comprehensive written agreement.

What is my next step in the process to legalize it?

I will say I have found the most helpful information with every step of the process when assigning contracts comes from Real Estate Skills which you can find on YouTube.

I know certain things like insurance, etc. can't be deducted.Are there are big missteps I should make sure I'm not making in my assumptions/landmines I shouldn't step on to make sure I can deduct these expenses and receive the right rebates in my tax returns at the end of the year?

Despite blowing through all performance projections it was just an endless stream of ridiculous requests for reports and information (beyond what was agreed to in the operating agreement) only to satisfy a junior analyst that probably hadn't stepped foot on a property in his very young life.  

This approach works well for wholesalers who sell deals to flippers, and flippers or realtors can benefit even more by taking the extra step to generate their own off-market leads.No one said methods like cold calling, direct mail, or Facebook/Google ads won’t help a realtor find off-market opportunities.Just a friendly thought, especially given the high costs associated with Zillow leads.

Any and all advise is welcomed, especially as I get my feet wet and start learning processes, next steps, and so forth. 

Take small steps consistently to achieve your goals.Good luck!