A smart seller will have note, deed of trust/mortgage/etc. prepared by a local real estate attorney (yes, he/she may work with/at the title company) and be sure the security instrument is properly recorded in the land records. 

Likely leads to more success.The purchase and sale contract for purchasing a note and security instrument (mortgage/deed of trust) is not the same as real property.

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Put the capital in a low-risk instrument (CD, t-bill) that will preserve as much capital as possible even while making your mandatory (5%?)

LLC are favorite protection instruments of course and ideally per property and state specific.

address encumbered by the instrument?

Problem is only "RE pros" get to do it.There are 3 income classifications in the US - Active, Portfolio, and PassiveActive income is income derived from your job, or normal trade or business.Portfolio income is derived from bank instruments - stocks, bonds, etc.Passive income is income earned from investments.Active losses can wipe out both passive and portfolio income, but it doesn't work the other way around.Portfolio (capital) losses are limited to $3,000 annually.Passive losses can only be offset by passive gains.Real estate rental income by its nature is deemed passive per IRC Sec 469One way to get around it is to become a pro - spend more than 750 hours or 1/2 your time in real estate.But most folks aren't real estate pros.

There are other options such as harvesting capital losses on other financial instruments, but the stock market has been pretty good lately, so that may not be an option.

Sherman, and Denison are growing a lot due to the Texas Instrument chip plant being built there.

. - There's no real protection of your principal since you are invested in a Fund instead of an actual debt instrument.