Because one of the best things about investing in real estate is the tax benefits. when you invest with your SDIRA, you do not get to take advantage of those benefits. but with notes, where income is interest income and typically taxed at ordinary income rates - that is huge if you can defer or not pay taxes on that income.

You would then hold the loan on a 90-95% LTV product at 5% (Which is taxed at ordinary income).

Those are for rental properties, not for flips.What you normally have on flips is ordinary income plus 15% self-employment tax.

For those who use their PAL along the way to offset rental income (for example) they would benefit more since rental income is taxed as ordinary income.

Yes, in some cases - and I would caution that such cases are rare - it could be a theft/casualty loss or an ordinary business loss.

Since you are discussing syndication, it is likely a passive investment to you.Whether the loss is ordinary or capital will depend on the type of investment and the positions taken by the partnership and will be displayed on the K-1.There are further things to consider such as whether the K-1 is fully disposed of or not.

The resoning behind this is that while capital gains would be at a lower tax rate, the interest is ordinary income is taxed at a higher tax rate. 

If you give them $1M and you collect $100k in interest, that interest is taxed at ordinary income rates.

This deduction can offset the income generated by the property, potentially reducing it to a tax-neutral position.For those with full-time jobs, the challenge lies in the IRS designation of "real estate professional," which has specific hour requirements that must be met to take full advantage of these deductions against ordinary income.

As long as the LLC member(s) are active participants in the rental operation, up to $25K in pass-through losses can be used to offset other ordinary income on the personal 1040 (subject to MAGI limits).