However, I've never done a rooming house before and wanted to know the best way to handle security deposits and how they may be applied to damages in the future.

I want to start getting my foot wet in rental properties.I want to apply for a conventional mortgage with a bank, but I feel that my income taxes are not going to be enough to back me up.

Not sure if the same will apply to an adult child.

Can I apply for permits afterwards?  

Rent is due and when the bank closes on the last day @ 5pm "boom" rents are then late and late fees apply.

Talking is good, you could inform them it is coming,  but you must apply pressure to get tenants to open up.

That might mean a large tax write-off IF the owner is a real estate professional (otherwise passive loss rules apply).Since your brother owns another business it is doubtful that he would be able to qualify as a real estate professional, but if he is married his spouse might. 

I still get Tenants arguing that they can't pay rent until the second Wednesday of the month even though we discussed that multiple times prior to their applying and moving in.

When this is all cleaned up wait 45 to 90 days before applying for loans. 

We have really focused on applying this, and it’s great!