When trying to send money for a non-profit to Germany, the money was stopped, he was questioned thoroughly about the origin of the funds.

What is a fair way to split profits on this transaction?

You could also set a minimum profit for yourself.

They needed to show a court that they were trying to sell, and they simply denied all showings.

I am not suggesting you do it that way, simply what works for us. 

I am looking to simply spark some conversations surrounding Long distance investing.

A business is an entity that generates income and expenses and calculates a profit or a loss.The S-Corp he is proposing generates $0 income and generates expenses that do not benefit the S-Corp - they benefit somebody else's business.So the S-Corp is going to generate losses year after year after year. 

Yes the plan would be the use the profits from the flip to pay off loan.

This shifts the urgency to the contractor to get done as quickly as possible to maximize profit. 

Once you have all those important numbers, a SPOT on rehab budget with 10-15% contingency, then you choose your profit, then you get your offer number.