Are there any other options aside from the rehab loan other than cash? 

I looked at various other models with numerous other companies, none of them had a more secure, risk free business model.

If you have experience investing in this area of the country and can shed some light and insight into taxes, insurance, Airbnb options (easy/hard/impossible), permits, flooding, other potential issues, etc., I'd be most grateful!

We have bought hundreds of loans the past several years, you cannot buy them from a MBS, they have to be removed from the security (typically due to non performing), or they did not qualify to be securitized (scratch and dent). 

Actually, having a an optional car to rent might be a great idea!

Airbnb because it's for furnished rentals and Zillow because I've found people looking for unfurnished often convert quite fast when given a long-term furnished option.

Out of state investing is a great option especially if your state isn't as investor friendly. 

James,There are several grant options and DPA program out there have you reviewed all of your options and compared them to BOA? 

One way of doing this would be to keep everything currently in your father's name, create a living trust, and son and daughter would be beneficiaries of the trust, and properties will remain in that trust upon your fathers passing in the future, from there you will have options as to what happens. 

We've spoke with multiple banks at this point to get a few options.