In that case a locksmith would help. if it is any other device made to secure the door, then use a drill or elecrtric saw to cut it.

If you are looking to make this officially separate it or make it a multi-family, I recommend engaging an architect in your area as well as the building department as you will need to meet certain criteria (independent entrance, another mailbox, etc.) 

I tried, before the crash, to take 80% equity out to buy another unit but had zero luck at securing traditional funding through a bank.

Because of this, my property management is going to help with organizing the rehab, and gives me peace of mind being a boots on the ground and security in knowing I don't have some random contractor running off with my money. 

Would this be a Security issue? 

Personally, if you can't come up with a 3.5% dp for a 200K property, you are not ready to buy a house yet....I feel that if you can't come up with 20% it's the same, but if you have stable income in a secure field, the 3.5% down payment may be worth the risk.

How would we handle this to make everything official?

It sounds like this would be considered a personal loan, secured against the house.

We recently secured a property in hopes of finding a money partner, with us being the working partner.

Wouldn't it make more sense to get the pre-approval first that way when he identifies the target property and puts an offer in he can tie it up, do 14 or 21 day loan contingency and use that time to secure the loan?