They use the property to secure the loan and when they give you all the money upfront (but the value of the property is the same when purchased) there is a lot of unnecessary exposure to risk.

Baby Boomers are a massive generation and Social Security helps pay rent for a lot of them, in some ways it's a version of Section 8 housing but obviously with different tenants. 

If not, make sure you get copies of the rental agreements from the landlord and the security deposits. 

This is one way to secure the price and funding for the project by the owner. 

Wondering if I should just start throwing out some lowball offers.

that everyone likest to throw around.Home Owners Protection Act of 1998 Summary should contain the answer to your question.

Where Do you end up putting the security deposit?

It sounds like your primary goal is financial security during this transitional period.

My goal is to slowly fix and rehab, I plan to live in the home for 1-2 years, I am not too worried about the return right now my main focus is getting a first home under my belt to learn as much as I can, hands on and continue learning and saving money vs saving and throwing my money into a rental.

From your story I gather:first, you secured financing through an FHA loan with a 203K included (where you planning on living there for one year to meet the fha requirements?