The legalization of cannabis in various states has created a niche in the real estate industry where the value of properly zoned lands and properties have been increasing at an astounding rate.

I want to make this deal worthwhile for both parties as this investor is willing to reinvest in future properties.

So unless it has appreciated by a huge amount in the intervening year, you might be able to take most of the proceeds tax-free.https://www.irs.gov/faqs/interest-dividends-other-...https://www.investopedia.com/terms/s/stepupinbasis...https://www.nolo.com/legal-encyclopedia/if-you-inh...Otherwise, if you live in it for another few months you could potentially qualify for the Sec 121 exclusion mentioned above ($250k single/ $500k married filing jointly).

Does it pass all of the requirements for a legal apartment — egress, window size, etc.  

My question is what is the best way to legally structure to protect us both and also best structure tax wise. 

If they signed the lease, then it's a legally binding document that is enforceable. 

You should speak with an attorney about drafting up an agreement between the parties involved detailing the profit and equity percentage splits and your accountant will prepare the tax returns accordingly.

Thanks, That doesn't sound illogical for the actual mapping process costs from Civil and city fees - I haven't done a 34 unit mapping project, but everything I've experienced suggests costs are less than linear as number of units increase.I would doubt that $100k budget includes right of way or utility work.Does that $100k include legal fees associated with HOA creation and establishment?

Maybe a local lawyer would provide a free or low-cost consult and give you the legal details you need.

Also the basement may not conform to a legal apartment due to egress and window regulations.