It just means you bring less cash to the lawyer or title company and allocate some of that into the Security Deposit account ... it's merely a virtual paper exercise.

Your other two options are solid options as well but it sounds like they require you to use your entire allocated amount of 40k.

Since I do a lot of deals, I allocate money (my own and my investors) to different properties.

Woulda Shoulda Coulda allocated a bigger portion of my investments to cash flowing real estate when I first started out (2010).

Many states have not only reduced the allocation (#) of visiting nurses but greatly reduced their compensation.

The portion that is allocated to your primary residence you could sell and take the profit tax free. 

You have no money allocated for fixing up the big systems, Capital Expenditures (Cap Ex), operations, or property management. 

But the reality is that the dividend represents the allocation of the net earnings on the company's general fund to every policy owner.

If your county tax assessor has allocated 75% of the property's value to the dwelling structure (improvements) and 25% to the land, then your depreciation basis will be 75% of your purchase price over 27.5 years.

My minimum take of any deal is 25% where I share in cash flow, allocated tax benefits, and back end profit.