Structuring multi-lot / multi-owner development project

[Perry Birch]

Hey BPers,

I own a single family residential property zoned for multi-family worth 300k with 150k remaining mortgage that I'm planning to add 8-9 rentable units on.  I expect the project to be ~1.7M and am raising ~600k to cover planning and initial costs and financing the remaining 950k (750k/1.7M = 44%).

My neighbor is considering selling me their (larger) property for 600k that is wholly owned but has very high cap gains pending.

We are both concerned with minimizing fees and tax penalties.

They are open to an idea I proposed where they would transfer the property to me in exchange for a comparable position in a LLP limited partnership stake in my project which would enable me to take out a HLOC sufficient (or nearly) to fund the project and buy them out, plus interest, in a chunk once complete/over several years.

Another thought was to owner finance with payments to them spread across say 5 years from the added value to the developed project but it seems that muddies the ability to establish an equity line that they aren't affiliated with.

Ideas?  Alternatives?  Concerns?

I genuinely want to protect their interest in the property and we have a very good relationship.

Thanks!

Perry