He is currently in police custody for breaking 2 retaining walls at my apartment complex and running away (DUI, Hit-n-run, attempted murder, etc.)

You may want to have your operating agreement (and understanding between you) stipulate you as the managing member and the future bro-in-law a member.Since you're putting up the money and have more at risk you'll want to retain decision making control even if practically speaking you'll both will be making the decisions together. 

All the numbers look good except their is a retaining wall that sets about 1 1/2 foot away from the house. 

All the money they were hoping to save can be quickly wiped out along with their escrow (which my seller is in the process of retaining!)

If you are looking to turbo charge the business as you say, it would be optimal to sell these properties, retain the capital, and position yourself into more lucrative holdings. 

If you are not a lawyer or have one on retainer, this situation is not for you.

The lender holding the first either wants to hold the mezz. debt or retain the rights to approve the secondary mezz. debt provider.Now mezz. debt is a lot more expensive than a seller second for interest rate and points.

What you are describing is not a pocket listing.copy and pasted from investopedia, definition of a pocket listing:"Any listing that is retained by a listing broker or salesperson who does not make the listing available to other brokers in the office or to other multiple listing system (MLS) members."

What should be my steps to transfer to LLC while still retaining the low interest rate I currently have?

You get the $500 either way.In my opinion, truly wealthy people don't care about how much cash in is their pocket, they care about how much real wealth they have earned and retained.