How legally binding is a promissory note ?

[Daniel Pitta]

I have a good friend who is a GC and investor here in the DC area. Long story short, he’s able to locate offmarket deals and uses private lenders to help fund the rehab costs, in exchange for a percentage of the profit.

He’s asking me to invest in a deal that he and his partner are looking to close, however he says that what he offers the lender, is a promissory note that they can register. I’m not able to come in first position as he’s using a bank loan to fund most of the project.

My RE attorney friend claims that a promissory note is not legally binding and I’d be putting myself at significant risk if I don’t record a deed of trust against the property, so that I could have the power to foreclose if the proverbial S hits the fan. 

Can any private lenders shed some light on this? I’m trying to take action however I need to understand the risks as I’d be putting a significant portion of my savings into my first deal.

Thanks in advance !