FUN is good  - even better is Fun & Profitable.

The buyout would be equal to the original cash the flip partner put in plus the profit you agreed on.  

Is it still worth pursuing or should I just walk away? 

The difference would be if you bought it without it going to auction, for the price they owed, how much can you afford to pay them, and still make a decent profit on the deal.

Take the profit and run.

They arnt as profitable as a multi family homes would be.

I’m still very interested in pursuing this.

I plan to use the profits and the knowledge of my local market from the process and utilize them to start flipping houses and invest in more rental properties. 

If you buy a house that requires $50K in renovations for $50K below market value (value after renovations), then like you surmised, there is no profit to be made -- after the renovations, the house is worth what you paid plus what you spent in renovations.

However, if he is giving you a discounted fee for his labor and is willing to gamble on a percentage of the "profit" instead then that would be okay - but you may have to dig in your pocket to pay that percentage at the back end.