My first private money loan through an SDIRA

[Marsay Winder]

I currently have five properties in my portfolio and I'm looking scale. I landed my first private money lender - a friend that I grew up with. He is setting up an SDIRA to invest 25k with me at 10% APR. he wants to allocate his money to me over five years and let it compound. I have a BRRRR deal in the works that I am planning on using the money for up front and then put that cash back to work afterwards. I did have a few questions that I wanted to get some advice on.

1. Collateral- he isn't asking me for anything other than a promissory note. I would lean towards recording against the property with someone I didn't know. If I opt to record, the property I'm working on has a seller financed note that I will be refinancing after the BRRRR is complete.

- if I add the note to title, I would assume this puts the private lender in second position? If that is the case, when I go to refinance and pay off the original seller, will he default to first position? Not sure how the refi bank would feel about this.

Main question would be pros and cons of recording the promissory note with title against the property if I’m not required to do so. I do however want to protect my lender and give them peace of mind for for future business and referrals.

2. Self directed IRA distributions. Since we are looking at a five year cycle, are there any requirements to disburse annually - ie interest payment back to his SDIRA custodian or can I just disburse his compounded interest and capital at the end of 5 years?

Thanks in advance for feedback