Structure a partner buyout

[Jeffrey Schwalm]

I'm looking for advice on how to proceed with a partner buyout. My business partner needs to get out of our partnership of a single family home in order to put a down payment on a house for his family and I'm not sure how to proceed. I want to buy him out because the property has a 3% mortgage rate, has gained 100k in equity the last 4 years and cash flows 1k a month. I don't want to do a traditional cash out refinance because the house would no longer cash flow and I don't have the funds to buy him out straightforward. The house was bought for $362k and has a mortgage balance of $250k. The home would sell for around 460k right now with minimal repairs needed. We are 50/50 partners on it. I could pay him about 50k right now. 

I'm looking for suggestions on how I might fairly structure a deal and still keep the current mortgage I have, at 3%. I've also read conflicting advice on valuing a buyout amount, if you take the net proceeds of a sale and split it in half or if you pay half of the appraised value minus the mortgage debt. 

Any advice on the situation would be greatly appreciated. We are looking for a solution that would meet both of our needs