The second property will be purchased with a mortgage (you can determine how high or low the leverage will be by adjusting the proceeds you use or the price point of the 2nd replacement).You are adding some measured debt at a level that your dad can be comfortable with. 

Same goes for number of LLCs and what to fund them with, since bear in mind that CA tends to be more cumbersome and expensive to have LLCs than other states.California is generally more cumbersome than other states when it comes to taxes and filings.

We have run into a problem with funding.  

Im a very vanilla investor, and not well versed in different finance options but it seems like an acceptable, but not ideal, option for getting your foot in the door with low initial funds/experience and very little effort.

The only reason I'm thinking about doing this is because I would get a ton of loan pay down very quickly because of his low interest rate and 0% secondary note to pay his Equity off. 

The Niceville market is HOT for retail houses and inventory to rehab is low.

Somewhere in the middle would be to invest in a fund or syndication. 

(I wouldn't waste my time at Lowes--they are more for DIY'ers and wannabe handyman types, IMHO.)Hope this helps you, and keep moving forward!

I'm going to have to crunch a lot of numbers for the loan, property tax, maintenance (which should hopefully be low on new builds), and I have to figure out how to obtain an insurance policy for the units. 

One of my friends has just pooled 2M in funding for fix and flips specifically for phoenix arizona to cover full deal acquisition.