What documents do I need when investing in a flip>

[Daniel Pitta]

Hello -

I am looking to invest in a fix & flip in the DC area as a private investor. A good friend of mine has a business rehabbing properties for rentals or flips. He is about to secure a loan for a 3br 2bath SFH in NE DC, that is a pre-foreclosure. The ARV is ~$700-725 and he's looking to close on it for ~$400. I'd be coming in to cover some of the repair costs, with about $40k of my own money. He's looking to turn it into a 4br 3bath and possibly turn the basement into a livable space.

He offers a promissory note for a payout of either a set interest rate or percentage of the profit, whichever is greater. This is a new venture for me, so I want to make sure I understand what I need here to protect my investment as much as possible. Should I have him add language to the promissory note that I am paid out first upon sale of the property? Should I be in first lien position? When writing a check for the investment, should it all go through my LLC or can I use my personal checking? This is giving me some anxiety so I'm looking for any advice I can get. I'd be tying up a good deal of money for 6 months so want to make sure at the very least I'm getting my money back. Thanks in advance.