So my friend is not really sure if the mold is harmless or harmful. 

Our experience has been that in cases where there has been prolonged smoking by the prior occupants, the only way to rid the most affected areas of the odour and harmful residues accumulated on exposed surfaces is to gut these parts of the property back to the studs.

You will also need to install cabinetry and countertops, and you may want to consider adding a small stove or oven if you plan to do more extensive cooking in the space.Finishes: Finally, you will need to finish the interior of the garage to make it suitable for habitation.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processesWe recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processesWe recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

You will not learn it all in a week, a month, or a year... they key is to make educating yourself a habit that you do not skimp out on. 

I don't know if that is the case with this child but there is no harm in listing a child occupant or providing some documentation if the child is an resident in your unit.

Is the property habitable?

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processesWe recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

The project manager telling you the house is in poor shape and may not pass is a sign you have work to do no matter the tenants living conditions.Keep in mind courts and agencies don't necessarily prioritize your interest or even the mom's where there are children involved...if documentation reaches the section 8 folks or the judge that the apartment has been documented unsafe for habitation, they may not care about the mother's rationales and will move to protect the children.