You should be able to take any normal business expenses associated with RE including section 179 and normal depreciation.

If you think pure mathematically, the amount of tenants out there who are going to stay 5+ years and move during "normal" months is always going to be drastically lower than the folks who move ever 1-2 years and all months of the year. 

Does this seem like normal procedure?

Things (in general) are less likely to fall apart if agents are involved, assuming this is a normal owner occupied deal.

If she can't get her paperwork in it is a normal pet. 

I normally use 10%, you may be able to only use 8%.

It took me a long time to realize what renters thought of as "normal".

Maybe it was easier when you started a long time ago when prices were relatively normal and you bought your own house built some equity and started that way..It's not easy to start with no experience and no capital so you need to leverage other people's experience.

They are experienced and normal transaction to open accounts for non-residents. 

(I believe to be the best option)Option 2: You pay normal rent of $950 and I honor your $850 deposit.