I just got off the phone with a seller who states that in a land contract, he would have to pay back up to 80% of payments to the buyer if the buyer defaults.

There's big risk in everything if the  US gov. itself is going for default.

Since the likelihood of default is lowered with a condensed timeline (and most borrowers will refinance before the adjustment period) the interest rates on ARM's can be .5-1.5% lower than typical 30 year fixed mortgage options. - Interest only.

mention hud.gov rules for housing livability and get your local housing agency to cite the default in writing. 

But, could I minimize risk of renter defaulting on payments for the 2nd property by turning this property into a section 8 housing unit with guaranteed income from the gov't?

Your investments are secured by the properties themselves and you can leverage your , market knowledge to make these assessments and lend to the right deals in case of default. 

The VA loan that gets assumed by a non vet binds the entitlement to the original borrower and if that new borrower defaults, the original borrower loses that amount of their entitlement forever. 

Without giving tenants this notice they are included in the protections by default.  

But, could I minimize risk of renter defaulting on payments for the 2nd property by turning this property into a section 8 housing unit with guaranteed income from the gov't?

IE the owner has received their 4 week Notice Of Default with the auction some day of week in 4 weeks.