I have had tens of thousands of dollars of damage caused by 'good dogs' and "wonderful, loving" cats-some so severe that it was almost better off to demolish the property.Even if I accepted a substantial ( and by substantial, I mean $10k or more) pet deposit  I still run the risk of exceeding that if enough damage is done. 

Also, do I have to keep tenant security deposits and last month's rent in a separate trust account?

The deputy has been depositing the money into his personal checking account to take $50 out for himself for managing the property and sending the remainder the owner out of state.  

Gross Potential Income $132,000 - Vacancy ($10,560) 8% - Concessions, Loss to Lease, Bad Debt $0 Effective Gross Income $121,440 Other Income (Laundry) $2,500 Total Net Income $123,940 EXPENSES Real Estate Taxes $12,500 Insurance $0 Contract Services $2,190 Trash Removal $0 Electric $0 Gas $0 Water and Sewer OR All Utilities $37,500 Legal $1,000 Management Fee 8.00% $9,915 Repairs and Maintenance  $7,500 General/Admin $1,100 Payroll $0 Other $500 Deposit to Replacement Reserve $3,000 Total Expenses $75,205 Net Operating Income (NOI) $48,735 Debt Service Principal $7,384 Interest $24,857 Total Debt Service $32,242 Total Distributions to Members $16,493 Member Contribution $234,163 ROE 7.044% Member Cash on Cash Return 7.04%

The contract also states "This offer shall remain open___ o'clock___   ______and if not accepted by said time this offer shall be deemed rescinded and all deposits shall be refunded."  

The key is to start with a sufficient security deposit and clear expectations defined in the rental agreement.

Lastly,  and possibly the most important,  make sure the security deposits are transferred to you at the sale.

One other benefit is that the often times the people footing the bill for rent and for the security deposit will be mom and dad.  

I will be paying my part of the loan by direct deposit to him.How would you structure the partnership ?

I assume that as long as I don't require any additional security, there's no harm in simply transferring the deposit from them to me?