Most tenants pay using secure ACH transfers from their account to mine.

They're very different thankfully so it feels like there's always at least one who's acting like a normal human being...A defeasance is something that happens on commercial properties when a securitized loan (like a CMBS [commercial mortgage-backed security] or agency loan) needs to be paid off early, either when you're refinancing or selling your property that has a loan on it.

We have a modest security deposit collected up front along with 1st month's rent and the cleaning fee.

Even if they do pay all the taxes, they don't get to use the benefits they are paying for (medicare, social security, etc.).

Very few allow any subordinate financing below their note but I do have ONE that allows 90% CLTV (they loan 75% and allow you to secure a 15% seller carryback as long as you come in with 10%). 

A minimum of $1M in coverage provides added protection in case of major liability claims, though $2M–$5M offers even greater security depending on your situation.

It sounds like you’ve got a solid plan in place with the bank refinance to secure long-term financing.

Although there is no way to prove this, (I reside in FL; the investment property is in AL) my GC tells me the unit was secured by a cage and bolted down.  

@Jordan BrownSince Orange County and Santa Barbara have high housing costs, using an FHA loan for a house hack could be a smart move, allowing you to put less money down while securing a property.

Don't forget to tell the tenant where you will store their security deposit.