You have a screen your notes, borrowers, etc. 3. 

Not sure if I would borrow against my equity to purchase an intangible asset.  

I can borrow money (from a HELOC?)

Typically a private lender like yourself will get a first lien on the property and  have it recorded, get added as a loss payee on homeowners insurance policy, and receive a promissory note from borrower.

We will also be borrowing about $30K for some rehab with a 203K loan.

They might not have the terms you want but loans in that range are not very competitive to the borrower like larger loans are.The REFI should have been researched heavily with 3 to 4 lenders lined up before even acquiring the property. 

I normally wouldn't want to borrow from friends, but would have enough reserves to pay off the loan worst case.

Likely about $1,000 depending on the amount you are borrowing.  

My original idea was to borrow the money from my friend and when I refi to pay him back take out less money and make up the difference with all the money I been saving plus income on the property.

In this case the rate I am willing to pay is 40% divided by 3 or 13.33%.I am at a point where I only borrow when I have to.Hope that helps.Bill