He will be putting up the $ for the house/repairs, I will manage the property and the subsequent tenants. We are dividing the equity based on the cash put in, and paying ourselves a "fee" from the rent in lieu of paying interest to a bank. My fee will come from the property management, his fee will come from the risk of his investment. I will buy into the house at a pre-determined rate until I have 50% ownership.
Just throwing out another idea: If your contribution will always be in the form of management, would it be easier - and far cleaner (in the form of far less arguing) - to simply have an agreement in writing whereby you take a certain $ or % of each month's rent for your fee? Are you wanting to participate in possible long term capital gains through an equity stake, or are you just looking to be partners by formally putting up some cash? Could you do it where you agree to a certain commission % for the first, say, $25k in rents (which would represent your 'equity stake, by taking a smaller % commission), and then after you reach that level, the rents after that are higher because you have a simulated equity stake (the higher rents were going to the other guy previously to pay him back his original investment).
I see the potential where he says "That house needed a lot of work, and I feel my sweat equity and value of remodeling was worth $20k", where you might think it's only worth $15k, and in order to buy your 50% stake, you have to pony up another $2.5k. If you want to eventually own part of the house, how about simply agreeing to a market value of the house at some point, and then save up your commissions and buy positions at 25% and 50% intervals?
Also, what is your exit strategy? 5 or 10 or 15 years down the road, if you or he doesn't want to be involved anymore, or someone has to liquidate their assets (think: lawsuit or divorce), someone moves away, etc....how would you value the properties for one person to buy out the other? By simply taking a set % of commission representing your stake, it makes the intermediate - and especially the exit - far more cleaner and neater. Not to mention the possible mess if one of you gets sued, and the interest in the partnership (and, by association, the other investor) becomes part of the lawsuit.