He is requesting to hold all security deposits which I am adamantly against both in liability and just overall pain in the rear.

. :) I have yet to find an attorney that can tell  me whether an earnest money deposit is even required at all, in a real estate contract. 

Which in turn relies on you finding great discount deals in the first place, which should always be "worth the investment".Firstly though, you might find that having $50k equity does not mean that your Lender will let you pull that much out in order to fund your next deposit.

There are limits to how much you can invest in your SDIRA per year, but if you are making money in your REI and have a business structure setup you can sponsor your own company SDIRA plan and contribute some of your own income from your company into the new plan and even provide a company match (benefits of business ownership!). 

By a stroke of luck, I found a much better deal and told Lender #1 I'm going with someone else, Lender #2, because it's a local lender and a better match for me right now. 

I'm curious where you got this idea, because it does not match my experience at all.

Is there additional steps or a deposit for getting a house under contract?

If the current owner is local and you are not I have seen in the past where the out of town owner is required to place substantial deposits to get service turned on.

The idea of saving up around $20-35k for a 20% deposit on our first home sounds good, ideally a multifamily.

What about security deposit?