It is something I wouldn't use personally.

Yes, if the person quit claiming had that right.

Personally, I like option #1 (I know a lot of agents will push you to #2 as that's how they make commission), but it helps in keeping an asset and using that capital to buy something more productive.

Trusting someone shows you are an honest person.

Once I've done some homework on the property and everything checks out, I make sure to visit it in person.

For 5 rooms I have each person have a $1,000 security deposit = $5,000 deposit for the house. 

But the house is only 10 years old, it's huge, it's in a decent area that's still being developed (Eastern East SF Bay Area), and it has the potential to earn us some money.Does the earning potential of the house make up for the headaches of renting in CA and having to pay a boatload of taxes on the equity when we eventually do sell?

Find better ways to get leads.Me personally...

While I do not personally have a contact in KC, I'd recommend using BiggerPockets' Find an Agent tool.Its a FREE service for BP members like yourself who are looking to expand your network and find local experts.Here, you'll be connected with an investor-friendly with knowledge/experience in your desired location(s). 

DM me if interested in getting a personalized game plan.