In order to mitigate risk, I asked that they provide 3 months of security deposit funds under the pretence that if they pay on time for 12 months I would refund all but 1 month or just apply the other 2 to their rent due. 

They may also know of grant programs or other such down payment assistance programs.Good luck!

Granted I’m hearing Refi with us commercials on the radio, it’s a lot tougher as the loan guidelines seem to be back to where they were.

hi everyone, I need to know if I should bother with background checks and security deposits fur a garage rental?

you have to be positive that the numbers will yield profit for all involved parties. if you aren't sure of the exit strategy or how you will secure funds then you still have a far way to go. do you have cash buyers with verifiable proof of funds lined up?

I am sure the seller figured if you could come up with $400K and with the property to secure the loan, that the risk was low.

My thinking is that even though I won't be getting a great return (5-6%), I'll have 100% equity that will allow me to easily secure loans in the future.  

Granted there are many variables, but there could be a market for selling your property. 

We have a line in our lease addendum that states if the tenant wishes to break the lease that they pay a one time fee equivalent to 2 months rent and forfeit their security deposit.

Less security and harder terms for your buyer from a lender when you sell.The real test on the strip center is the quality of the location and demand for a spot.