Prospective client is renting as a guarantor for mother in law to live nearby him, proposing to do a 2 year lease, mother in law who will be the occupy is retired so all credit check and income is based off daughter and son in law.  

I've found dozens of great deals in the areas I already know (I love doing a regression analysis after a final sales price has been established merged with a prospective analysis on a project) - but before I pull the trigger on doing one myself, I know I have a bit to learn first.

I would make ZERO OFFERS until you have a game plan and run the numbers on the prospective property.

Looking to rehab a fire damaged property. 

Not just from missed rent, but damage/repairs, costs of eviction, etc.After numbers that work for you, finding a good residents for each door you have is key to success. 

I manage my properties in Oklahoma, and our Landlord Tenant act specifies that you security deposits can be used upon termination of the tenancy to correct any damages, but my understanding is that you are not able to utilize them for any reason until that point.

We still probably should have waited for better roommate prospects before settling on this one though. 

See lines 268-276 on page 7 of the state contract:"DEFAULT OF AGREEMENT BY BUYER: In the event of any default of this Agreement by the BUYER, the SELLER shall have at the SELLER’S option the right to declare this Agreement null and void with no further demand, or to demand and sue for any of the following: 1) Termination of this Agreement; 2) Specific performance; 3) Termination of this Agreement and an amount equal to 10% of the Sale Price as stipulated damages.

RISK OF LOSS:If subject property is damaged prior to transfer of title (any, Buyer has the option of accepting any insurance proceeds with title to the property in “as is” condition, or of canceling this contract and accepting the return of the deposit.

Since the damage is done if she is paying well and on time  you really are better to keep her.