I will say, although I have been lucky with low vacancy and expenses, I am always very conservative in my calculations and err on the side of caution.

But don't liquidate your rental under the erroneous assumption that you need a pile of your own cash to start flipping houses.   

Here are the relevant links:MLS ListingFHA Loan Calculator (with property tax, HI, and MIP estimations)BP PDF reportIs it possible I plugged in an erroneous number somewhere to be coming up with -$452.24 monthly cash flow?

However, you probably want to err on the side of getting the current tenant OUT, and the new tenant IN - But if you discuss the situation, you might find out the new tenant is more flexible than you thought.Make no mistake here, this is your fault for not having a proper lease agreement.

To each their own analysis but being a 50 year old me already I have seen enough of what can go wrong to err on the side of caution! 

I would tend to err on the side of caution and notify them that you will be keeping the deposit and last month rent regardless.

This is not a terrible thing, and that's why I always encourage people to err on the conservative side.

Btw, there is a procedure for eliminating erroneous items on your credit report and its quite simple.

How do you handle it when someone makes an erroneous assumption regarding your profit?

I know that we should err on the side of caution; however, I need some help for the peace of mind that we made the right decision.Thanks!