I think this is the method I would like to go as it fits in line with what I envisioned. 

Ask if you can do little tasks like having to go change a lightbulb, change a lock, etc.

It's not worth hiring a lawyer but as you suggested, small claims court may be an option IF you hired them in your personal capacity OR if your jurisdiction allows LLC owners to go to small claims and represent the LLC in court (many, most?

So if you sense the deal is not going to go through within the diligence period you can cancel the contract.

.- Son to have RE license and path to life he desires.  

If you choose to go with this strategy you could complete your exchange and immediately do a cash out refi.

Hey Stephen, do you mean you want to go into this with 0 invested yourself?

I figured lowest money out of pocket was the best way to go, and in this case FHA would provide the lowest downpayment.

LLC's are still the way to go but yes you can't tap into owner occupied mortgage tools such as HELOC's or high leverage.

My goal is to move more onto the ownership/management side of the real estate industry as soon as possible, but am not sure the best way to go about making the switch.