This is in case anything unexpected happens and for peace of mind.

That new payment does not leave much room for unexpected expenses, but assuming you did a renovation you may be expecting minimal repairs.

You go through the process of analyzing a deal, getting it from accepted offer to closing, working wit contractors and understanding all the components of a house, advertising it for rent, backgroundchecks, leases and ongoing property management...

I’ve seen all kinds of unexpected things, even new builds with sewer line issues, so just because the property is 15 years old doesn’t mean the sewer line is perfect or doesn’t need to be inspected (especially if the property is in Texas, which has a lot of areas with expansive clay soils that can damage a sewer line).

TBD - planning to update cosmetics to current market trends, replace HVAC and other Critical components What was the outcome?

There is also risk of divorce, bankruptcy or other unexpected life problems, so you need a contract to protect yourself.I would have suggested loaning him the money, but most mortgages have requirements that down payment cannot be from borrowed funds.I am honestly surprised that he can't do this deal on his own.

Need a new furnace, roof, whatever it is, you need to have funds set aside to cover those unknown costs, even an unexpected tenant turn. 

Also keep in mind that the size and leverage component of your equity position on your balance sheet should drive your perception of risk relative to the size of the note you're being asked to kiss. 

But if you're asking how is the value attributable to any land component of a given property acquisition determined, any reasonable method will suffice (e.g., allocating the land value based upon local property tax valuation ratios might be acceptable).

We are looking for a REI lawyer to talk to about all of the agreement components before submitting the registration for our LLC.