If you talk to the bank, their foreclosure or loss prevention department would probably know more than their regular customer service dept.

you have to be positive that the numbers will yield profit for all involved parties. if you aren't sure of the exit strategy or how you will secure funds then you still have a far way to go. do you have cash buyers with verifiable proof of funds lined up?

I am sure the seller figured if you could come up with $400K and with the property to secure the loan, that the risk was low.

@David Weintraub asking to receive a 4.99%-6% loan will be hard on a regular conventional loan right now. 

If the regular market will not cover it, have your agent check in the Excess/Surplus lines. 

My thinking is that even though I won't be getting a great return (5-6%), I'll have 100% equity that will allow me to easily secure loans in the future.  

We have a line in our lease addendum that states if the tenant wishes to break the lease that they pay a one time fee equivalent to 2 months rent and forfeit their security deposit.

If you go it alone, rather than add to your list of questions I would recommend that you bone up on the various terms and, clauses and offsets regularly used in office leasing to help best achieve your clients goals.For example, when dealing with tenant improvements (item 7), the landlord might say "I wont pay for any TIs". in which case you could offer 50% rent or free rent for X number of months if the tenant  pays for 100% of TIs. 

So yes, your ongoing cash flow will be less once you borrow more, but, the reasons you'd be buying that second property are: it's undervalued; and/or it has potential for you to value-add using your specialist skills; and/or even when you refinance all your deposit back, it'll still be paid off by the tenants, with no further regular payments from you.

When tenants move and I return security deposits, should I divide the deposit equally among the tenants and write a check to each tenant and give an equal amount?