The principal involved is that when a tax-exempt entity such as an IRA is engaging in a trade or business, and therefore competing with tax-paying business, this tax levels the playing field so tax-paying businesses can remain competitive.The equity portion of the SAM agreement is a stake in the profits of the real estate transaction.  

Do not engage with them.

"Investors" yes, I have used the term improperly when I am actively engaged in some RE activity.

In the future I won't be buying out-of-state unless I can drive there in a few hours and be actively engaged with the property if necessary.

Ali does make a good point it is just one method of buying.. at the end of the day owning any rental anywhere requires the Investor to engage and use much more due diligence and active participation ( in most cases I know some get very fortunate and have one tenant stay 5 years and its neat and nice) but that is not the norm in the rental business in most place's..

Welcome aboard to Bigger Pockets @Leon Henry , very engaging first post.

Here is the key language (in my opinion) (found under the heading "Doing Business in California"):California defines doing business as "actively engaging in any transaction for the purpose of financial or pecuniary gain or profit" . . .

If your not a busy professional and can engage often they can be managed. the lower end properties in my mind are the play ground for the local landlord that does it for a living.Most of the bigger turn key guys will agree  Mike D a  Chris Clothier etc.. they will be the first to tell you buying low end high touch hard to manage properties are tough for those looking for what your looking for, which is complete passivity.

How ofter you engage the attorney just depends on how big or small the property is and where your ROI lands.

As for promissory notes, etc, you might engage the help of an attorney if you're not versed in this.