While evaluating potential investment properties these past few weeks, I have realized that the average rent in Austin is comparatively lower and due to high interest rates and property tax, the outcome is mostly negative cash flow. 

If your friend just wants to be the bank and park his money for a guaranteed rate of return then I think 10% is fair and pay it like a dividend. 

Seller's deceased father had transferred title to his now deceased attorney.

It's hard enough borrow at regular mortgage rates and generate cash flow. 

I'm assuming that with your hard money interest rate will make that a pretty high monthly bill.

All 3 units were occupied very quickly and the property is now cashflowing above our projections with vacancy rate (so far) below what we expected!

Our broker mentioned that the average interest rate is 7.5-9% and they have never seen the rates drop below 7%.

The disadvantage is the rates will may be higher than a Freddie/Fannie-backed loan that you get in your name. 

When you are "manager" of a property, the homeowner has effectively transferred all responsibility of risk management to you; that is a big part of what they are compensating you for.  

Seller's deceased father had transferred title to his now deceased attorney.