California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k.

A possible solution could be to hire a handyman to cut out the section of drywall that has been water damaged and use a moisture meter to see if there is excessive moisture in the wood and other parts of the drywall. 

True although the fires this year just adds to the reasons to leave California (excessive taxation and regulation, overbearing political correctness, downtowns littered with feces, etc.).

When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or refund the Tenant.If you end up with excess funds in the Checking account, I recommend you transfer it to a third account designated explicitly for future investments.

I find that putting a utility cap in the lease agreement they sign and calling their attention to it really helps make them more aware that they'll have to pay for excess usage so, fortunately, I haven't had to actually bill anyone yet, but the language is there if I needed to. 

Unless you are talking serious money, which I would say is 2k or more in excess taxes, it may not be worth your effort.

California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k.

But again, your profit after selling costs (and any capex improvements) would have to be in excess of $60ok to really make sense.

The issue we are running into is that lenders are not recognizing the excess amount he earns as income, therefore it looks like he will not be able to afford any loans that he would be approved for.

The least states:"Tenant shall pay a "late charge" not in excess of five (5%) percent of the amount in arrears for each month the arrears remain unpaid if any Rent is paid more than ten (10) days after the due date thereof, to cover the extra expense involved in handling delinquent payments.