Or, am I overreacting and PMs truly just lease the property, hold on to deposits, and fix things when they're broken?

@Zehua Zhou,You can use a Fidelity non-prototype account to manage the rentals, but it will have some of the features available with the bank's checking accounts, such as having a debit card, mobile deposit, and bill pay.

The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations.

And of course do NOT pay personal, or unrelated expenses directly from the LLC bank account (maintain an LLC bank account - do NOT use a personal account for LLC expenses or deposits!).  

Our preferred method was to have them deposit the money in our bank account, we gave them deposit slips. 

Instantly I can tell the hottest markets from the normal and cold ones, and separately determine which one's I am priced out of due to crazy high values.I'd suggest a similar value-based approach if you have the data to calculate on to identify a few markets to start looking for deals in, but remember this is still too broad of analysis to make a go/no-go decision on the projects you find.

Do I have to return his security deposit?

It is increasingly common for a PM to charge a "leasing fee" which covers all the costs of marketing, showing, screening, placing tenant under contract, collecting deposit and rent, setting up utilities, getting the tenant placed, etc.If the PM can't justify the cost, then they shouldn't be charging it.

I try to have as much as possible EMD (not standard EMD requiring a signature from the buyer but non-refundable or as a security deposit) from the end-buyer.  

Always allow pets no matter what they have, just charge more if you think it's a higher risk pet (best practice is to actually specify pet fee and pet deposit in the Ad).