How can he avoid the $150,000 tax on his capital gain?

Can he sue my company for the taxes or is the lien  just secured against the house? 

Can he advertise and promote referral bonuses or finders fee's for distressed properties?

RUN don't walk away from this tenant if you can..... He

Great friend & we have been warned about the dangers of living with a close friend but we want to try because we believe we can. He

Second but most importantly can he be held liable for misleading us in the first place.  

For instance does "the guy" have workers comp, GL insurance, a business license, trade license, professional liability, does he take before and after pictures, will he be around next month/year when there is a problem, whats his warranty on labor/materials, how fast can he respond, does he understand the issues involved in dealing with tenants regarding repairs, does he show up in a marked truck, uniformed, name badge or does he show up in a wife beater driving a beat up pickup and I could go on....The point is that there is ALWAYS someone cheaper out there but an experienced investor knows that cheaper is almost never better and in fact most of the time costs more money in the long run. 

Can he or she provide references? 

So by putting the loan through a TX bank, can he legally avoid CA laws?

If you don't have the historical data (previous contracts/jobs) or the technical know how... it can he hard for a person to know if a job should take 4 hrs or 10 hrs.