If you can only cover the down payment I suggest waiting till you can cover all the costs, you don't want to be in a situation when a major repair hits and you have no money 

Always better to cover your butt just in case.https://www.irs.gov/pub/irs-pdf/fw9.pdf

Can I ask the section 8 individual to cover cost which I will reimburse once payment comes in or am i at the mercy of the government?

If he got a job somewhere else, we would move, but I'm concerned that we wouldn't be able to rent out a house in OC for enough to cover the mortgage + savings for cost of repairs- not to mention cash flow.  

Use a hard money lender and receive 50k from a private lender to cover the 20% required by a hard money lender, do I pay taxes on either funds received?

Instead, get in touch with a securities attorney to CYA (cover your a$$).

There were 2 doors into the actual basement that were locked but somebody was living/doing other things in that covered space.

If not then you include language to cover potential losses. 60 days notice (also usually in codes) one months rent penalty etc.There are a few major problems with lease break language.

It won't cover the entire purchase of the condo so I will take out a 15 year loan for the remainder.

Harsh Singh Short answer is that the 50% rule should cover everything but debt service and profit.