As already mentioned above, you will report the activity in the schedule C if there no entity involved or if you have single member LLC. 

The time and effort involved with screening and background checks seems difficult to handle so far away.   

Do I also need to have a real estate attorney involved?  

Since this analysis doesn't involved hard money lenders, in MOST cases bank mortgages don't ask for points or other charges that we should be aware about or what are your thoughts?

@Shawn York The process for the past several months has been much faster than ever since I have  been involved.

Do any older investors have any advice as to ways I can get involved in the RE community while saving up?

There are a lot of costs involved though. 

I am not an attorney but I think deals involving real estate must be written.I also don't understand when you say you offered him $135,000 with a $1,000 option fee and then paying him $1,000 a month.Do you mean you are currently renting from him for $1,000 a month but have an option to purchase it for $135,000?

I have some old friends involved in small rehab projects in the city.

Get them on board sooner than later and get them involved as the boots on the ground.