How would you handle this in the security deposit?

@Kee Lee  since you said they were older it may be possible that someone became eligible for social security resulting in the change.  

This officially puts you on title as the owner. 

I would recommend only using a short or mid-term rental house hack for a 2-4 unit property or a house with a detached ADU for your security and the comfort of the guests, which will make it more profitable.

Yes, you can sell it.Sometimes Peoria will grandfather a duplex and refer to it as a "legal nonconforming" single family zoned property with duplex as permitted use.If this is the case the new owner will be able to legally and officially use it as a duplex.I have also heard of people finding an architect to declare that the house was originally built as a duplex, which would help you get it rezoned as multi-family and duplex as permitted use.PM me for more info.

Partnering with experienced investors can provide valuable insights.5.Creative Financing:Explore creative financing options like seller financing or private lenders to secure better terms.6.Rent by the Bedroom:In high-demand areas, renting by the bedroom can boost your rental income significantly.7.Local Market Analysis:Stay updated on local market trends and network with other investors for insights and opportunities.Always analyze potential investments thoroughly and run detailed cash flow projections.

Regardless of situation you should be aware of all lease terms of current tenants, security deposits, tenant contact info, pets, rental rates, etc. 

I made the mistake of empathizing, let them have keys before the full security deposit was paid.

i  would say househacking in expensive area is the best strategy.I got all tenants paying my mortgage , i never met them and they made the house more secured as well because there's always people in the house. 

Hey Austin,It's best to have an Attorney draft this as you're getting into offering securities to your investor friends.