A cost segregation study was performed on this single family home in Fort Worth, TX purchased in 2023 with a depreciable cost basis of $272,633.

Building cost has almost doubled in the last 4 years taking B and definitely C markets out of the picture for new builds.  

It depends on what your contract allows for ... and suing will take time and cost money. 

Should I deduct the cost from their security deposit or is it considered normal wear and tear?

This is an email I just received from their rep:"The initial appraisal cost would be paid by ReadyCap but the expense would be taken from any from the sale/refinance and settlement to release the lien.The plan would be to determine the amount of equity based on the updated appraisal and first lien and then negotiate a settlement with you for the release of the lien.

I would speak to contractors to understand what this will cost.

My big concern, like you, was the cost of property in California but there are some cheaper markets in state as well that have a lower barrier to entry than the coastal markets.

THe best I have seen is up to 89.99% LTV on a second meaning you'd still need to come in with 30K+ closing costs. 

Given the cost of placing a tenant and the vacancy, I'd want a 1 year lease and then go month to month.

I'm not aware of a state to state effect on the STR Loophole, several clients have utilized purchasing in Oregon with us from out of State.