Lastly, we're not quite sure how their deposit sits on this as things are a little confusing - I assume the non-payment via the cancelled check means they've breached the lease agreement and it's now forfeit, not subject to some claim on their part that they left it in lieu of the rent, right?

One months rent forfeited would be better than nine...

They cannot be income unless forfeited.

I knew a guy who was doing good back then, but Feb 2014 forfeited his company via not paying his tax debt.

@Brant Richardson I'm a licensed agent, so I would forfeit my commission and just pay 3% to the buyer's agent.

If you back out of the deal you could possibly forfeit the money depending on reasons.

If I am unable to contact the tenant to return the funds, then I can send it to the state and they will hold it until the owner claims it or it is considered forfeited.

I'm just worried I'll end up submitting a bunch of deals (if they don't accept the initial one I have planned) and never secure one they deem "appropriate" (and therefore forfeit the entire $3000 since I will never GET an actual loan to pay back so I can get reimbursed at the end of the term).

In return, they forfeit any monthly earnings and when the home is sold any equity will go to me.

Re: your 1099-MISC Security deposits or any part thereof, are not income to you until forfeited at lease termination.