I'm looking for advice on how to proceed with a partner buyout.

After that time and loan paydown, I will either sell 1 or 2 of the properties and use the proceeds as a large down payment on my primary residence.

If so they would have sold their house for (ultimately) $75,000 more than they did; received 9% interest (probably as much or more than if they invested the proceeds) on the amount they were waiting for, and if by some small chance the borrower/buyer defaulted, had an opportunity (along with the frustration, cost, etc) of reselling the property and obtaining a “windfall” profit.2.

In order to defer all tax you must purchase at least as much as your Net Sale(contract price, minus the closing costs and commissions) and use all of the Net proceeds (the net sale, minus any mortgage payed/ Equity in home being sold).  

So, I would definitely proceed with caution.   

@Alexander F Pollock how did you proceed on the Quit Claim Deed ? 

How do you suggest I proceed?

As you gain experience, you'll determine where your talent lies and how to proceed.

Hey @Ujwal Kolli,When you do a cash-out refinance on one rental property to pay off the mortgage on another, the interest tracing rules generally allow the interest to be deductible if the loan proceeds are used for business purposes, like paying off another rental.

Unfortunately, this relationship did not turn out the way we had hoped, and after falling short of their budgets and projections, we terminated them and proceeded to build out our own property management company to manage the facilities in the fund.