Should he get a portion of the monthly income as well, equal to his percentage of property owned?

If I had less than $20k in capital gains or less I would consider keeping the house as a rental.You will have depreciation recapture on the portion you depreciated when you sell your house if you choose to rent it out for any period of time.

He also agreed to an interest rate of 4.75% on the carry back portion of the financing.

Which portion of the costs are you paying?

We were partners for 17 years, when I bought out the rental portion of the business and they took over the notes and unsold properties.  

This will be a property that I would ultimately live in and potentially rent a portion.

If not, IRS will impute the portion of the payments as interest.

Matt is on point, with the exception of the unmatched system portion.

We have run the full gamut, from exterior pain, to residing portions of the house to going through the zoning board to do the development.

And then on top of that you have ballpark $700/mo to $820/mo going towards paying down the balance (again, depending on the assumptions), which basically means your portion of the payment is going directly towards equity while the tenant's payments to you are covering the interest / prop taxes / etc.