On June 7th, we sent an itemized list of deductions via text; he responded on June 8th, disagreeing and threatening legal action.

One common approach is to form a legal entity, such as an LLC, where both of you are equal partners.

This doesn't replace the need for a MSA that will capture additional clauses needed on a Contractor-SubContractor relationship, this is just a project specific form you would use in addition to the MSA (prepared by your Attorney):This template is for informational purposes only and does not constitute legal advice.

.- The whole process is simplified—no co-ownership legal headaches.I’m curious about the pros and cons of something like this.

Stop hanging out with your deadbeat buddies who spend all day drinking, talking sports, and otherwise wasting away.

Someone in the legal profession told me that we can give her 30 day notice and then proceed with an eviction. 

Give proper legal notice of non-renewal and get them both out.

We have a RE attorney & mortgage broker to make sure our operation is legal & compliant.

This is for basic informational purposes I am not an attorney and this is not legal advice.First, if you offer to purchase a property using a HELOC to fund the purchase you cannot later back out of the agreement because you couldn't find PML or investors.  

I think hard money lender to take this risk cannot legally charge appropriately which means the law is working against you (the law meant to protect owner occupied owners from unfair loans).I agree with @Jay Hinrichs that your best option likely is to sell on the mls.