This method may require you to move into another rental yourself as many lenders need you to have a tenant renting your home for at least a year before they will count that income to offset your mortgage payment so you can qualify for a new mortgage. 

I have recently witnessed some people around me that I look up to have financial troubles in fields/jobs that should be “secure.”

Is there particular/formal documentation we need to provide regarding the transfer of security deposits, rents, agreements, etc?

There is a cover letter that states:"Attached is  the  security deposit statement.

I am wondering if anyone out here has purchased a property using this method. 

Ours all want good sized shower stalls with glass doors, stainless appliances, coffee stations, a pantry, solid entry doors & opt for security systems with WiFi cameras.

The "owner" at the time claimed that he no longer has the security deposits because the tenants were behind on their rent payments.

The purpose of this is for security.

I continue to buy properties that meet my investing criteria (harder to find than a few years ago, but there are still some out there) and I have been working on securing access to capital to be able to buy more assets when the prices drop. 

This is a strategy to hide what you have done, not a legal method of circumventing the clause.