There are 2 different issues here:-Deductions from the security deposit need to be made within the timeline outlined by your state. 

If the ORS ever audits you you won't be able to deduct any expenses done from your personal account.

They haven't been late on any payments, but they are employees of his so if they don't pay he deducts it from their paycheck.

Talk to your tax professional about Section 179 depreciation deductions.  

At the same time, I was able to find an insurance company that quoted each duplex at $457 annual premium (insuring each duplex for $60k with $1000 deductible and $500k for liabilities). 

The nice part (unless tax codes change) is that you get to deduct the mortgage interest.  

Maybe getting a high deductible or lower coverage may get the quote lower. 

Expenses are deducted on a proportional ratio on Schedule A/Schedule E.

I have a $288k heloc on my house that I am using.Currently I am using it for my first flip that I am in escrow on. using it for the down and rehab $...I just couldnt justify hard $ at 10% and 2 points when I can get 5% $ on my house and accidentally deduct the interest.

Even with deductible I was knuckle and dimed to a tune of $12,000 out of pocket.