I would weight the pros and cons and determine what best helps you reach your goals and manage risk.Pros:-30 year fixed rate mortgage available if <4 units - lowers your risk and helps you predict/manage cash flow when rates are on the rise.  

How to mitigate the risk of them up and leaving is to collect larger security deposits or have them pay a couple months rent.

However, one partner is hands on, lives in the area, and will be doing all the ground work; to include securing the financing, finding the deal, and self managing the property and everything that comes with that.

second just have the family give you a loan like any other lender secured by the property. at an interest rate you negotiate.. refinance and payoff lump sum.. 

During that time I would secure a mortgage to pay off the first and second. 

In that case a locksmith would help. if it is any other device made to secure the door, then use a drill or elecrtric saw to cut it.

I tried, before the crash, to take 80% equity out to buy another unit but had zero luck at securing traditional funding through a bank.

Because of this, my property management is going to help with organizing the rehab, and gives me peace of mind being a boots on the ground and security in knowing I don't have some random contractor running off with my money. 

Would this be a Security issue? 

Personally, if you can't come up with a 3.5% dp for a 200K property, you are not ready to buy a house yet....I feel that if you can't come up with 20% it's the same, but if you have stable income in a secure field, the 3.5% down payment may be worth the risk.