How do we protect ourselves from a tenant causing us significant damage in excess of the deposit amount? 

@Michael Plaks has a great post on this topic.2 - Assess the value of those tax deductions to you: The value of a deduction depends on (a) whether you're actually able to use it to reduce taxable income and (b) your marginal tax rate.As an STR, assuming the average rental period is 7 days or less, key items to consider are: (a) material participation and (b) avoidance of "excessive" personal use.

As much as 70% of the deals wholesalers bring to title, don't close, so you could very well loose your earnest money, as well as any expenses you put out for inspection, option money, contractor bids, survey, etc. 

Lower demand and excess of investment properties. 

Condos have very strict rules regarding %owner vs % investment and can loose their condo cert if they don't abide.

You loose your capital gains exemption if you turn it into a rental (some exceptions). 

We also had an extra umbrella policy.Now that a few years have gone by and we've obtained more assets, meaning we have more to loose, it's made since to start an LLC and start to move things under its protection.Even if you get a good management company, which sounds hard to do, you'll still have to manage them and make sure they're staying on top of things.

I would guess in the near future you'll start to see meters that automatically shut-off after excessive use.

If dogs are loose inside the unit and you are uncomfortable going in management will have to take that up with the renter And you will probably need to come back the next day to vet that unit.

When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or refund the Tenant.If you end up with excess funds in the Checking account, I recommend you transfer it to a third account designated explicitly for future investments.