The plan is to use a HELOC, then do all the BRRRing, which should leave 20% of the ARV tied up in equity (the downpayment I mentioned saving for), and the rest goes back to pay off the HELOC.

An unsecured note would not be tied to the property at all.  

While I'm in a similar situation with it being a foreclosure that has some minor upgrade potential, I'm not in love with the house and starting to regret tying up a lot of cash in it.

Which seemed to be a nice way to do it but we had a lot of our own money tied up in it.I have approached different lenders/ or hard money people and they seem to be all over the board.

Doesn't seem like it fits the BRRRR strategy very well since he'd still have a lot of money tied up in the deal.

Don't tie both of you down with the same mortgage if its not needed.

Hey Tyrone Watler im new as well i haven't tied down any deals as of yet but I didn't spend money on leads I did D4D (Driving4Dollars) and i actually got a few calls off of that...so maybe just gas the car up and do some canvassing u may find sumthn!

Good explanation @Dave Toelkes.To tie it all together - @Brandon Hall's advice was that if you have suspended passive losses that you aren't able to use, you can invest in passive income assets which will offset the suspended losses. 

I am seeking advice on how to turn this deal into a fair and legal win/win.I found a duplex in my target area for a fair price, but I have a couple other deals going on so my capital is tied up.

Again this returns only 6%  One issue for me is with that cash tied up it can't be used on future opportunities, eg a flip.