Ultimately, the two objectives are to defer tax on the sale, and participate in 50% of the profit/loss and appreciation of the new property.Perhaps a better way would be to use the $250K proceeds to purchase a 25% interest in the $1M property and have my parter get 75% interest while being solely liable for the $750K mortgage? 

As noted, more information is needed for sure but I can think of a few possible scenarios depending on each of your goals and objectives. 

@Rosario Aiello start by defining and quantifying your objectives and criteria.

I suspect if your neighbors object to a permit being issued for a multi family project being built the application will be rejected. 

I still see the Bay Area as prime, and if immediate cashflow was not a primary objective for you, I do believe that you'll still see the values appreciate over the long term. 

The object is for you to offer terms without creating a contract, especially since you wouldn't have had an attorney prepare it yet for you. 

We starred with 160k and right now we're liquidating our portfolio and should have a bit over 300k to work with.Our end goal is to have cash flow but it's not our primary objective for the next 5 years and we would prefer growing our equity as much as possible, then 5 years from now converting it to cash flow.Another think to point out is we're foreigners so the max leverage we can get is 60-65% LTV.Given all the above, how would you recommend we utilize these 300k for maximum equity growth in a 5 year period?

That's ok, but you need to put some thought into it so you aren't running around at every shiny object you stumble across.There are cash flowing deals in Detroit to be had even if you're borrowing the full purchase price at 8% interest.

The typical CPA answer I'll give you is that it depends (on your goals, objectives, etc), but you also need to consider the lending/financing implications.

This will provide an objective assessment of the property's worth and help establish a realistic selling price.Negotiate the sale price: Considering the appraisal and the $100,000 discount, negotiate a mutually agreed-upon price that reflects the family member's offer and the property's market value.Draft a purchase agreement: Consult with a real estate attorney or a qualified professional to create a legally binding purchase agreement.