He under quoted us about $50k, not including the upgrades we chose, since we had funds to cover that.

Based on your posting the damage seems to be extensive, especially since it’s affecting the structure of the home such as a floor beam, sill plate and subfloors.It appears there is active termites as well as a beetle issue and both must be resolved before repairs can de done.You didn’t mention home value, just purchase price so it’s difficult to say what to do from this point.At a minimum, I would have the termites and beetles dealt with and get a bond from the termite company to cover the first year for more treatment.Also, have a licensed contractor give you a repair estimate.

Wait until the floors are done, if you don't the house will show terribly, and the pictures will not convince potential tenants to even inquire, not to mention that they can't move in for 2 weeks.

You could require that the property must appraise for at least 148K and that you will cover the difference above that. 

I was wondering if it is realistic to get one where the cashflow from 2 units covers the mortgage principal and interest?

With an FHA loan you can now get a 6% credit back at closing to cover some costs.

The question is, how do i show the lender that we have the total assets needed to cover the down payment when i will be acquiring some of it from my partner?

I can swing by and take some pictures of the area if you want to share the cross street and/or address you are looking at.

We enjoy working with BHB and I believe they cover that area. 

In my case the rent of one unit covers all the principle and intrest of the property plus a little more.