He is trying to take me to small court claim to get more of his security deposit back claiming I breached contract by entering the house.

Get a signed lease and security deposit on your current home. 

I targeted this area as many properties match the 1% rule and we're built in the 1900's to 1920's and have fantastic foundations here in Milwaukee.

If you know where and what you want to invest in, contact an agent and ask to get automatic alerts when properties hit the market that match your specifications.

And, if the grass dies from something outside of your control (disease, drought, etc), do you really want to have your security deposit taken to replace the lawn? 

They sent me a check for the deposit, a month before there stay they sent me the balance.

An owner can provide us with any bank account they want to receive deposits in. 

We went through a few property managers, one stole all of the tenant's security deposits, was taken to court and lost his licenses.

Even in that situation you will most likely have to front some of the expenses to get the deal closed (earnest money, deposits, inspections, etc) but can reimburse yourself with OPM equity at close. 

I would just keep your security deposits or reserves with the bank at minimum.