They paid their portion of the rent.I have found a lot of investors bring their personal or political feelings into the investing conversation. 

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

Generally there are multiple units for each "zone" if you will when I've seen them installed.Regarding your problem at hand, I personally would simply adjust your plan to move and make your initial plan to get the current issues resolved, while costly now, in the long run holding onto the unit will likely pay off. 

The FMR for a 6 BR house is over $1,800....one person's trash is another person's treasure!

Also, long term, I expect Sac will enact tougher restrictions on STR, given the intense housing crunch we're experience, so I personally don't expect that to a be a good long term strategy.

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.  

For a $300,000 property it could be $30,000.Then, do you have that much cash or credit available to you, in the event of a Due on Sale call?

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

For me personally, our STR and our little inn provide more than half my family's income so I feel I have a fiduciary duty to my wife and kids to maximize that. 

People like to rent from a person not a 'brand', it's more personal.