Hopefully his students are better, I don’t like the idea of thousands of people entering the industry trying to find sellers willing to sell via subto who all think it’s okay to bend the truth, especially with transactions like subto that are complicated and require a lot of trust on behalf of the seller (that the buyer will do what they say and keep making the payments and not wreck the seller’s credit potentially affecting their ability to have a place to live in the future because you can’t even rent an apartment with bad credit). 

the note is converted or exchanged for credits?  

Alternatively, if the bank ( assuming there is a bank) is fine with it, you could negotiate a credit and escrow the funds to be released after you do it yourself.  

If my target would be low income residents, are there any grants, tax credits, or funds available to help me with the conversion? 

It's pretty easy to get suckered into a bad out of state deal because others want to make a quick buck, and you'll be left holding the bag. 

I could not give a good or bad report.

Renting it out while strategically leveraging the equity could be the best path forward.As @Jaycee Greene said, DSCR looks at your credit rather than DTI.

Paulette, it is good to call out these bad contractors and unfortunately you are caught in a bad situation on what to do, start by a small threat that you will contact the BBB and report a claim if he does not show some progress, or if you know an attorney, maybe a simple letter from one may get him worried and he may start showing up.

Am I getting greedy to ask for an additional seller credit at closing to help offset some of repairs needed?

A lot of investors have 10 doors, but 6 of them are bad.