He does have savings for the down payment but I fear that he will not be able to get financing. 

You are not violating Fair Housing Laws, and filling the vacancy with a more qualified tenant (if you can find one) will save you countless hours of time and a significant amount of money in the long run.

Having your contractors license in "general Construction" will allow you to do a majority of the oversight and save you money.

If the person is a functional person but poor, they will look for housing on their own two feet and they will save up their own security deposit. 

From my limited research, it looks like the initial capital has to be from a capital gain and not from ordinary income/savings. 

I've been considering going with vinyl flooring in the 2nd unit, to save on labor, and perhaps formica counters, to save on cost, but it might not save that much money overall, and it would not be consistent with unit 1 choices.

Doing some local bank hunting can save you lots of money.

I have enough money saved up for the down payment on a small property however I don't have the credit to get a loan.

Anyone focusing their efforts on foreclosures is probably also saving up money to buy a Blockbuster Video franchise.

I am not in a hurry though I know some people want to buy 20 doors in a year or something but I like save enough down so that I am "deep in the money" on both cash flow and equity.