Roman Antonio Gurule III

I don't know if this is the right place to post it but I have a question in regards to an audi I am looking to buy from a friend of mine. He had bought a 2001 Audi a4 1.8 L v5 quattro with turbo a few months back for 3 or 4 thousand. While driving it home after purchasing it the car blew up on him. He told me when it happened that the heat gauge was all the way to H meaning it was overheating. He ended up getting it home but it had minimal power (from what he told me). I went to check it out and there was no oil in it. So what I did was put 2 quartz of oil and filled it up with water as it was low as well. I started her up and instantly a cloud of white smoke came out of the exhaust. I let it run for around 5 minutes and the entire time this white smoke was coming out the exhaust. The thermometer gauge never fluctuated or got hot. I shut it off and checked to see and all the oil was gone and the water was fine it did not change. Also, when it was running the engine sounded a little weird almost like a diesel but not super noticeable. From my research and asking around it seems that it's either a head gasket or a cracked piston ring. Is this something that I want to get in to? I'll probably offer him 800 for it and I have around 1500 to spend on whatever I may need to fix. What do you guys think?