If you weren't credited with the deposit, and there's no documentation that would support a claim that it had been used for some previous purpose, you're on the hook for it.

It has to be a "like kind" exchange, rental for rental.

I kind of like notes to balance  a portfolio if you have a bad rental month your note payment comes in and covers a bad tenant situation.

Isn’t it a bad idea to have real estate of any kind in a S Corp, too many tax issues??

This would also help you determine what kind of work you need to do on your property and how much you should be spending on your rehab. 

If I was looking at it to build a spec house  70k all in is about right for a 350k exit  120 way too high.100k if your very efficient builder.. or a owner / builder and gets great pricing.. 4X is kind of a rule those price points.were it flip flops is the   2 million dollar lot and the 8k build and sell for 4 million like I am sure there is stuff in seattle like that and bay area and other high priced areas.but at the 350 exit I like the 1/4 or less for lot price to make a 15% gross profit margin after all costs.

But in the same breath its kind of simple.

Check with the code enforcement office to find out exactly what kind of materials you will need to use for a secondary egress.

I kind of rambled the more I typed. 

I have seen cars turned into BBQ grills, tables turned into desks, all kinds of things turned into light stands, and so forth.Just because a word or phrase is used for multiple things doesn't mean they are related in the sense that we are criminals because we take an old tire and turn it into a coffee table vs someone who breaks into the DMV and creates fake IDs.