I ended up putting about 20% down and then offered her an equity split on GROSS earnings for 2 years to cover the rest.

The elimination of the mortgage payment (added CF in your mind) isn't enough to cover the out of pocket cost to you.  

Second person abandoned her lease and refuse to pay all  the amount required to cover the property damages at her house.

This obviously covers the 2% rule.

Thanks Business purpose loans do not require NMLS numbers and are not considered "covered mortgages" by Dodd-Frank. 

I would offer them double their current rent amount, so they have enough to cover a new deposit and have some play money - which is the incentive.

The seller has agreed to sell me the property if I can find funding he is willing to cover down payment with a seller second.

2nd piece is the house hack...We think best course of action would be to have an investor friend we know buy the house in cash, once we are done with renovations, we then take out a full mortgage on the house to cover whatever he paid for it and then pay him back with some interest.

In other words, if they have no proof, but you do, then you win as most states have landlord/tenant law that favors the tenant.As was stated above, keep your small claims court date and be prepared to take your proof, as well as a VERY detailed account of everything you can remember from conversations and other occurrences between you and the landlord, or the landlord's rep, to court with you.In Colorado, for example, the landlord must return the deposit in full, or issue a check and a detailed statement covering the amounts not returned, within 30 days. 

I'll have about 20% of the purchase price in the bank but I will not be putting 20% down, this is saved for minor updates and to cover for unexpected vacancy expenses, I'll be going for an FHA.