Without having much info, I would need to know the financial situation of the 'close family' to determine a best approach.

I would have a conversation with the tenant, and then after that if you determine that’s in your best interest and theirs to seek out a new tenant give them plenty of time and make sure you leave amicably because in case you get more rentals and they are looking in the future, I have a higher income that relationship is sure to last, which means that you have guaranteed business in the future.

We came to an arrangement where any sale price over $1 million, minus construction costs, would result in a profit-sharing opportunity.I’m currently trying to determine the After Repair Value (ARV) for the property but am having difficulty finding reliable comparables.

First, I'd determine whether you like to be active (managing your own portfolio of rentals as you are today) or passive (letting go of control and day to day decisions/operations).

So, I DON'T trust my ability to determine someone's character based on a few minute casual conversation and I DO trust my ability to manage even difficult tenants. 

Completing AP requires the other party to file a suit in court during which the judge determines that the case has merits, and ultimately transfers the property to the filer.

We will use the British or UK model which is primarily used in the India and China markets where we will be marketing to.Quality grades:  This is a general discussion, there are more detail determinants, I am not showing.A- basically no flaws, generally 100% "Heart" wood. 

Quote from @Derek Stevens: @Michael Baum My initial question was about determining a sale price not raising capital.

Lenders may ask for these when determining the post-renovation value.The After Repair Value (ARV) is key to your refinance.

Lenders won't value it off the income approach unless it is a 5+ unit and even then, the LTR market rents are more often used to determine value.