USDA regulation §3550.57 states "Existing dwellings must be structurally sound; functionally adequate; in good repair, or to be placed in good repair with loan funds; have adequate electrical, heating, plumbing, water, and wastewater disposal systems"My question is more on the specifics of some of this language.

Is there an adequate heating system and insulation to live in the property during the winter months?

Both water heater and heat pump are around 18 years old though are functioning normally right now.

Baseboard heat and window units. 

Set aside that you should follow the law -- you should, by the way -- but to paraphrase a great Robert DeNiro movie, you should also be smart enough and disciplined enough to pull back from something when you feel the heat around the corner.  

The home is cooled with window units and heated by the same window units/ceramic wall mounted natural gas heaters.  

I feel although this secret room would be vented there is a lot of radiated heat in this room. 

(Be aware of heating systems with steam boilers, they can be problematical and do not always heat buildings consistently.)You will want to develop relationships with several lenders.

There are services that only assist with heating/cooling related bills, some that deal only with rent, some that help with children-related bills, etc. 

I am an Investor & Licensed Real Estate Agent, I work together with clients who want to invest and search for deals like this all over Miami.