In any case, I thing your investment are pretty solid and should earn you something between a decent return all the way to a spectacular return depending on the local economic situation.  

If you were able to increase the value of the property significantly after the rehab, then you could bring the deal to a community bank  to refinance and take the hard money lender out.You keep all the equity and don’t have to file a partnership return for your annual tax return, which can be costly.  

If you go with the partnership route1) You need to manage the money going in and out of the business bank account.2) File a partnership return and be responsible for issuing K-1's3) make distributions to you and your partner for cash flow that you receiveYou will likely spend many hours on a nice gesture.I may want to consider instead to give a christmas gift or a bonus for early completion of projects.

(We had a boat as an AirBNB and the plumbing would clog very easily and we had to state a similar statement and it got us out of refunds and bad reviews) hope that helps! 

I will definitely DM you on the side, looking for as much advice I can get, and happy to help anyway I can in return!

Nate @Nate Marroquin   You can use the income from your tax returns on the current rental adding back your paper loss (depreciation) and add back the mortgage interest, property taxes, home owners insurance deductions on your tax returns. 

Just another way to diversify and get a great return at the same time.  

And, if a higher return is offered with moderate risk, don't believe it.

I would definitely speak with an attorney before selling/disposing of the property prior to the court addressing the joint assets - you could easily open a can of worms.

Quote from @Stuart Udis: @Danielle B What data are you relying on that suggests Section 8 leased properties provide for better returns than other investment strategies?