How do you structure your exit strategy in a partnership?

[Shannon Holman]

I'm entering into a real estate partnership with someone I've known very well for a long time.  We've worked together closely on separate deals (advising and assisting on our individual properties) so we each know how the other works, how we communicate, and what our strengths and weaknesses are.  We are buying in a neighborhood we know well and we have the same goals for the property we're buying together, a long-term buy and hold.

So far so good, but sometimes things don't go as planned.  We plan to consult a local attorney, but also wanted to reach out to this group to see how people handle exit strategies when one person wants to cash out but the other doesn't want to sell the property yet.

Obviously we need a way of doing a valuation on the property, but we're unsure whether that valuation should be based on an appraisal, our real estate agent's assessment, or some combination of those and other factors.  

It is unlikely that one of us will have cash on hand to buy out the other directly, so the holding party will probably have to mortgage the property to cash out the other person, thus incurring additional costs for financing the loan.  We need to figure out of those costs should be borne equally or should fall only on the party holding on to the property.

How do other small-time friends and family investors handle these issues?