Or can we just distribute the profits and losses to our returns via a schedule E without the partnership returns?

Make sure your deductible is affordable should you have a loss. 4.

Basically, you need to budget in for a month of loss of rent.

With that math your profit is $140k, again less than you had in equity with the old house ($790k-$525k-$125k=$140k).It looks to me you did well with selling your first house, good with the second house, but still an overall net loss to wealth after all is said and done.

I was considering the feasibility of not paying the balance only.

I believe it tends to give me a slightly lower return, because the sponsor is going to be more careful, and if there is a severe downturn will prevent me from taking catastrophic losses.

Since I can see "the light at the end of the tunnel", 9 months of focus is feasible, however he rather get started investing now, with the notion that if we did 2 flips, he and I could make enough potentially to pay off said debt.Thoughts/advice welcome.

All costs for the home are solely related to profit...or potentially loss, but only if you sell the house. 

Agree with Adam, and that fee assumes clean and reconciled financials are provided (trial balance, profit & loss, balance sheet, and general ledger in Excel format).Partnerships are anything but simple now. 

Here's a list of what we ask for in our LOIs and contracts:Operating financial statements for the property, including income statements, expense statements, capital expenditures, for the last two years of operation and year-to-date financial statements for 2020.Prior two (2) years tax returns and addendums for the Property.Current tenant leases, tenant correspondence, tenant credit information, tenant security deposit register, and delinquency report.Onsite staff payroll records to include salary, bonuses, payroll taxes, benefits, etc.Monthly owner statements and rent rolls for the past 12 months.Contracts, service agreements, and files pertaining to the property.List of maintenance all maintenance requests (complete and incomplete) for the last two years of operations.Real estate tax billings and assessments and other correspondence pertaining to real estate tax calculations at the property.Copy of Insurance Policy and claims documentation (loss runs).List of capital improvements and any and all necessary related documentation and warranties.All existing warranties and guarantees from architects, contractors, and material and equipment suppliers, all of which would be assigned to Purchase.Any existing environmental Phase I/II reports, engineering reports, soil, mold, radon, asbestos, hazardous substance, termite, or other tests, studies, or reports.Any existing appraisals.Itemized inventory of all personal property.Twelve (12) months of utility, water and sewer bills.Twelve (12) months of bank statements.Verification of additional income from operations including but not limited to application, pet, late, and other fees, etc.Copies of title policies, title reports, land surveys, site plans, deeds, or any architectural plans for the property.History of or pending litigation against the Property, its owners, or its managers related to the Property or the operation thereof.Such additional information, documentation, or access as Purchaser shall require