If it gets too bad, I’ll consider other options, including converting to condos and selling them for a profit.

Because I am a bit older (late 50's) I was hoping to cash flow with a 15 to 20 year note so as to quicker build equity while still being profitable. 

It'll be impossible to be profitable without raising the rents substantially and cutting your expenses.

You could use a "cash rich" Partner to help you by taking part of any profit. 

If I give a free month as incentive I am guaranteed the lose of $3500, if I take the gamble and not collect the deposit, I’m hedging my bet that the tenant wont trash the place, and therefore less likely to lose $3500 bucks. 

When you are an investor in these deals, you are either a limited partner that has no direct influence on the execution of the deal (i.e. just providing capital to make the deal work) or a general partner that is responsible for executing the deal.The risk in executing these deals and making a profit are laid upon the general partners.

We are splitting the profits 60/40 him.

2nd question - does anyone have an easy equation on how to calculate holding costs while doing a flip as well as what profit margin you look to make?

Total Closing Costs (including commission): $16,637.00Total Profit: $50,179.00 ($209k - $82,184 - 60k - 16,637)Total ROI: 35.29%Total Project time line: 10 months June 2017 - April 2018.The Buyer was obtaining FHA financing.

You are profiting off of raising rents and handing the expense of doing so over to the taxpayers of Ca.