Maybe this tenant will think to read the agreement and comply...I say keep the deposit for the sake of our fellow Landlords.

Draft an operating agreement with all the stipulations you each want.  

Property management – does anyone have experience with a property management company who operates in the area. could you please share your recommendationsWhat kind of ROIs and Cap rates should one be benchmarking to in this neighborhood of Newark Experienced Newark Investors - @Ibrahim Hughes, @Steve Wilcox, @Angelo Mart, Others – do let me know what you think about Upper Vailsburg and ideal returns here.

Assume that the operating agreement states that the equity split from LP and GP changes from 80/20 to 50/50 after payback.

Don't they still have to comply with the FHA guidelines which prevent this loan from happening?

I could see how cash and fixed interest debt could hedge your bets, but also increase your operating expenses and risk in a potentially highly volatile environment.

Also, does anyone know of any good contractors who operate in the area who are honest and perform well?

If you are ever in the Chicago area hit me up and I will show you how we operate! 

With the Checkbook IRA LLC, the IRA itself is at the back end and simply owns an IRA for which you can have signing authority and operate out of a bank account of your choosing.Again, if the IRA will have equity in the flip, then the IRA is engaging in a trade or business activity as opposed to passive investments such as hard money lending or rental income.  

Not knowing your experience level, I highly recommend that path for the newer investor who is operating with limited free time but wants to get going.