However, I've never done a rooming house before and wanted to know the best way to handle security deposits and how they may be applied to damages in the future.

I handle several section 8 apartment unit properties so it would be a pretty simple matter to evaluate the rent rate through government support, guaranteed rent definitely helps me sleep at night (provided our president doesn't shut the government down long enough for HUD to delay rent payments).Let me know if you want to seriously run the numbers on this place presuming you have the equity to get financing on this deal (175,000 for 10% down, $87,500 for 5% down, etc).

I actually resolved a situation myself (toilet handle was loose) but now am really needing a plumber as a toilet is stuck.

Save a "reserve" so you can handle vacancies, maintenance, and all the bad things that pop up when first buying an investment.My recommendation is that you read a book like "Set For Life" by @Scott Trench and get your financial house in order so you go in prepared.

I was going to go with an umbrella to handle the liability side.

Madison Management handles my delinquent note deals.

However, your desire to renovate, or the current owner's desire to sell the property, does not supersede the tenants' rights under the lease agreement, and you inherit the terms of that lease when you buy the property.If the lease does not include the use of the basement and the garage, the owner (or you after you close) can petition the tenants to remove all of their belongings from those areas, but the tenant would presumably have the right to comply and thereby not compromise their continued rights to the first floor (basically, a lease violation that is curable, if cured, is no longer grounds for eviction). 

A staged lease-reading followed by a Q and A is much more the kind of training and performance exercise you need in the landlord-tenant relationship.Of course, once you get up past a certain number of tenants, holding these kinds of formal lease-signings is going to get very hard to handle and/or you're going to get sick and tired of showing up.

They have systems in place to handle problems quickly before they snowball and run up the costs.

Guy was trying to “Size Me Up” and I didn’t handle it well, as I never handle being “sized up” well.