As far as damages once she is out, then from security deposit you would take damages, rent owed, court costs, ect.. and you may have to file another small claims court action to get that money if the amount exceeds her deposit. 

Plus, they are much more likely to treat the property as their home so it shouldn't be as bad if you have to take it back.If they don't pay their monthly obligation to you they forfeit the deposit and you can evict them.

I have her $500 security deposit and she is very eager to get it back in full.

Review and process applications8.Collect security deposits and review leases with tenants. ( I dont like to just hand tenants a lease to sign without going over it in detail so that there is no confusion as to what is expected of them down the line)9.Inspect units semi-annually10.File for evictions immediately when rent is more than 5 days overdue. 11.

What you have described doesn't sound like deposit.

Its the Entitlement mentality,   Me , Me, and only Me counts.I notice several threads where the new woman landlord comes on here saying the tenant is ANNOYING(keyword)  when the tenant isn't that.Wait till the tenant calls with a plugged up toilet amd this lady has to plunge a toilet full of D.i.a.r..h.e.a.Wait till this lady is texted by a former tenant to give back security deposit or family will be OFFED.These women need a good ole Wake-Up call.It's not just young women.

I immediately took your advice and applied for a personal (unsecured) line of credit with my bank that I have deposits with.

The lease term works out perfectly for my timeline, the payments and deposit will be made by the insurance company, and I will still do standard background and credit check on the tenants.

The lease income can cover the CapEx (and hopefully provide income), and you can use a security deposit type of write-up to make sure that the machines are returned in decent condition.Short answer: Don't just provide a washer and dryer.

Can I deposit the funds into that account?