Does he have to report the income he received this past year and declare it a rental event though he would like to move back in eventually? 

Typically, there are two options- either the repairs must be made prior to title transfer, or the buyer has to agree to assume those violations which involves making a written guarantee that the repairs will be made within the required timeframe after closing.

A loan option you could look into that will potentially preapprove you for more is a DSCR (Debt service coverage ratio) loan, which is based on the rental income of the investment property you are looking to purchase, instead of based on your personal income for a conventional loan.

Many require no income verification. 

In of your other threads, you seemed to be interested in other debt investments that generated income. 

This all depends on your income and risk tolerance.

DSCR Blanket loans are a cool no income no doc product .

Did you have to show proof of income?

It seems like we would be paying decently more even with the rental income than we would be just renting an apartment.

It is now rented out to a nice section 8 tenant and I have that income coming in every month.