, so, why does reaching the end of your contract dictate a Traditional IRA to Roth conversion?

The cap rate is dictated by the market. 

The liquidity of a note is based on its characteristics which make is saleable: pay history, equity, borrower credit, down payment, etc; (of course this is assuming its Dodd Drank compliant, has a good chain of title, etc) and the liquidity of how quickly it can be sold on the secondary market is dictated by price, aka yield.

If their bank has that home collateralized too it might be tough for you to refi them unless that bank will subordinate to you...The collateral agreement you are referencing is just the note they signed with the bank that will dictate the terms.

Nothing he posted indicated that the NORMAL cap rate for a building was anything other than what the MARKET dictates. 

This will dictate where you're going to want to house hack.  

You've got a LOT on your plate and only you can judge the family dynamic that you'll be working within but IMO you want someone you can dictate to and expect them to fully comply; if they don't they get replaced.  

The market is going to dictate what the typical percentage of purchase price you can reasonably get per month.

If we want to use private funds for the other 20%, does this have to be approved by the 1st lender (Local bank in this case), and would they dictate the terms or are we able to negotiate that with our second lender. 

Can a majority owner dictate any rules about specific things you can do with your unit?