Also, what do note servicing companies or banks charge to service the note?  

I am not going into this with no bank acct to cover these unforseen costs.

This option would use the bank to subsidize my risk, but it could be a legal nightmare if something should go wrong.

It depends on how you split the revenues.If the house is free and clear, you two should decide if you get to bank all the money after paying expenses (taxes and insurance) or if you have to split it somehow in favor of your rehab work or just 50/50 the whole time.Also, if your friend decides to sell it year 2 or 3, and you still haven't recouped your rehab funds, do you spit the proceeds of the sale?

The bank may say they have the option to extend it another 10 years, but that isn’t guaranteed.

Traditional bank loan, 15% down How did you add value to the deal?

Try a local bank oR credit union first.

A hard money lender said I need to have an LLC for the purchase, 15k bank statement for last 2 months and $3,500 minimal fee for loan along with 12% interest on 13m loan.

This will need to be a small bank who holds loans in their own portfolio.

Do banks consider ROI or appraised value?