The security deposit is for damages , tell them no and start the eviction process

If you subsequently purchased a property for 200k, would you count gains/losses against the 50k you now put in or against the 25k you started with as that’s what you’re actually out of pocket, depending on how you look at it.I hope I worded that clearly 

I first got started with real estate by buying a 3-flat on a whim 5 years ago and now I am back for more.Happy to meet everyone!

No General Contractor wants to do a remodel with the residents still living there....they will charge you more (they probably will not show it, but the prices will be higher because of the huge PITA factor and increased liability)I would wait until you have completely moved out and then just give them the house empty and ready to roll.....But you can get a Scope Of Work going and start getting bids...even plans and permits if you're going that far...

This starts early on with preventing what could potentially go wrong by attracting an awesome tenant and looking at what vulnerabilites currently exist in your property.  

I've been investing in real estate with my wife since 2017, when we started with JV deals and small flips.

Ask an investor to tell you their buy & hold or flip economic model and they start stuttering.

You never know how much damage the termites have done until you start tearing into walls/floors....can get expensive fast.Location is the only thing that cannot be fixed, and you said this property was in a "really good location". 

I started using it as a STR 4 years or so ago.

You may want to try hiring a local handyman that you can email jobs to do and speak with 1-2 times weekly, meet 1-2 times monthly.Most will put on a good show for a few months then either get lazy and cut corners or start raising prices.