I downloaded and installed a dedicated server using the official dedicated server guide on the official rFactor 2 website here. In addition, I used this guide posted on the Steam rFactor 2 guides by Christopher E. to create a RaceEvent which I used on the dedicated server. The server is hosted on my personal computer and I select the "Custom" connection type when launching it and change the upload and download speed value both to 5000. When I connect to the server, I connect using the same machine that the server is running on, and I specifically open rFactor 2 first, connect to the steam friends list, and then launch the server. When I select my car, I make sure I have a different car selected than what my friend does, who also connects to the server. The result is that I can see him driving around, but he can never see me and when he drives into me, my car has no weight, and gets completly pushed by him and takes whatever damage the game figures.
I am going to link this thread and the identical thread I made on Steam rFactor 2 Discusions together.