Usually as long as their are no life threatening issues (no HVAC, windows won't open, no hot water), the housing authority will began to pay the rent and give you time to address the required repairs.

I make all necessary repairs as soon as possible, too.

YOU decided that it was in YOUR best interest to do a remodeling at this time rather than just repair the access areas.

These are my options:a) Expensive contractor - wants $8,500 to demo and cap the two stacks plus some other brick repairs/repointing. 

She/he should be able to provide you with a chart of accounts to choose from, such as Repairs & Maintenance, Supplies and Amenities, etc.

After some research, I'm thinking it would be a good opportunity to proceed with the offer and to set aside the "free" money for use for repairs/renovations and holding costs to have some extra cushion.There seems to be much debate on the use of credit cards in real estate investing, but considering my circumstances .. 1.  

This isn’t really a big deal though.Rent payments can be abated over unresolved maintenance issues and tenants failing to abide by S8 requirements.Many S8 housing commissions will not hold tenants accountable for damages they cause (tenant is supposed to repair or lose their voucher).

Also, is he entitled to the security deposit (minus any repair expenses)?

They are not allowed to do any repairs or modifications, none, without written consent.

Identify necessary repairs and improvements.2.