The seller remains personally liable on the note while no longer owning the property securing the note.2.

I don't withhold security deposit returns for BS things.  

Security Deposit: Follow Oregon’s rules—return deposits within 31 days with documented deductions.5.

Unless you're 110% confident in the MF purchase and you can drive up the value of the building quickly (6-12 months) and then secure longer-term fixed financing to pay off the HELOC or loan. 

This financing option provided the flexibility needed to secure the land and begin planning the development of 12 patio homes and two duplexes.

By highlighting my ability to close quickly and my plans to enhance the property's value, I secured favorable terms that fit my investment goals while laying the groundwork for the broader development project.

Otherwise, if you prefer not to go through that process, you'll be hit with a 25% tax on your rental income, which can eat into your profits.I also recommend investing in a couple of cameras and a good smart lock for security and monitoring.

How should the security deposit be managed in this transition?

While contractor availability and supply chain slowdowns are challenges, they plan ahead by securing labor and materials early and building in project buffers.

I feel like just about every month, I see RE investors with 1-2 year's experience starting a new fund and advertising on Facebook for LP's, as well as the daily "JV deals" that straight-up violate securities laws.