This works best when the seller is motivated and open to flexible terms.4.BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat)– If you find the right undervalued property, you can finance the rehab with short-term funding and then refinance into a long-term loan, pulling most or all of your money back out.5.House Hacking– If you’re open to living in your investment, you can use an FHA loan (as low as 3.5% down)to buy a multi-unit, live in one unit, and rent out the others.

I have experience handling this in Michigan with my short-term rental.

Moreover, it allows you to set the terms of the lease agreement according to your preferences, which can help prevent misunderstandings and disputes in the future. 

I’ll be developing more and more and as such looking for a long term collaboration.

Make the offer appealing by highlighting the short-term ROI from his renovation expertise and potential profit-sharing during the partnership.

I would send them notice today that explains what will happen after the current one-year term ends.

If I understand correctly; the seller would receive 80% ($40,000) directly from the mortgagee at closing and would enter into a personal agreement with me for the 20% down payment ($10,000) in which he would be reimbursed separately from my mortgage payments at a separately agreed upon rate and term?

Sometimes I've heard of PMLs doing "creative" financing like this where maybe they do a very short-term loan that can be paid back once you sell the land.

I figured the term would be exclusively licensed but I may be mistaken. 

While you can start with a written agreement, a professional document will help protect both of you, particularly in terms of ownership, responsibilities, and profit-sharing.