They are deductions against the rental income.

They will be very cautious as to who they lend money to, and you should be very cautious of who you allow to lend money to you. 

Any damages would be deducted from the deposit.

This covers possible deductions, depreciation, and capital gains calculations.Discuss Long-Term objectives: Talk to your spouse about your long-term objectives, risk tolerance, and property management preferences.Ultimately, the selection will be based on your own circumstances, goals, and preferences.

Prop 19 basically allows a property to be reappraised at death of the owner such that the heirs have to pay prop taxes on the current value except for the owner occupied home of the deceased that is moved into by one of the deceased children (capped at $1m, In san Diego the average home price is approaching $1m, San Francisco is over $1m). 

This allows for consolidated financial reporting of all properties under the holding company.Operating Company to Trust: Alternatively, the operating company could directly pay rent to the trust.

Here's the catch, they told me they would only agree to the deal if I allowed them to live in the house for the next 5 years.

I would rather give them info to allow them to make an informed decision rather than just some blanket CYA type advice. 

He will not be legally allowed to divulge private information from/to either party.

That prevents 20+ story buildings being built there, hence prevents overcrowding and oversaturation of STRs that you see in Destin and PCB currently. 2) There is a large portion of the north side of Okaloosa Island which is strictly residential, where STRs are NOT allowed.