You could easily buy land that is zoned for multi-family and find a lot where you could build 4-8 townhomes.

Add on rollers, tape, floor coverings, etc and it could easily be $300+ in supplies. 

You need to look at return on equity, how much cash flow can be generated putting your equity to work vs the cash flow this property will produce.

If so, then I would return the portion of the security deposit to the one leaving and collect that same amount from the one staying. 

Consider having a lock that can be easily rekeyed or a pin code enabled lock such that you can easily change things, especially after a drama filled hissy fit where one tenant suddenly leaves out of anger/frustration.8.

Even with multiple units, with current interest rates and a competitive market (prices have continued to rise even with higher interest rates) think the Madison market is a stronger long term ownership strategy, where the bulk of your return will come when you sell from appreciation in rents and property value. 

Also, running a flip with no money and hoping you get a good return with all the other stuff going on in the background starts to add stress, and you end up not enjoying it.

Depending on how bad the conditions are, accrued pref may never be paid out and original contribution may not be returned in full.If pref equity's original capital contribution is not returned in full, common equity is in even worse shape.

Quote from @Chris Seveney: Quote from @Jay Hinrichs: few things if these are sold to homeowners were the dodd frank rules rigidly followed when you did these.if they are sold to investors then DF doe not come into play.while credit and such matters keep in mind note buyers will want a 12 to 20% or more annual return..

You'll end up with a dog that you can't unload at the end of the day when you've dumped thousands of dollars into it with no positive return.