Once they are not covering the belongings inside, it got cheaper.

I need to sit back with a few colleagues and just put this response on the big screen and read it out-loud because in 10 years everyone take notes, this guy “Matt” is going places beyond where he is now.

Other than that you should be able to cover the down-payment with your funds.

Second, I can't imagine the deposit covers the outstanding $1600 so the problem doesn't go away by giving up the deposit, the figure just gets smaller.2) The late payer.

It looks like a cover to a crawl space(?).  

If it is not by an appreciable amount, you should stick with the existing tenants but have them re-sign a lease to make sure everything you want is covered.

They screen people really well and their goal is to get people to stay as long as possible.

I think you’ll be stuck covering the costs until lease end, unless you can work out some kind of deal. ($50 off rent, but you pay water usage that has averaged $40 the past 6 months).

When his tenants can't cover their part of the rent he pays them to do work on the next house or to mow lawns at his current properties. 

Personal property would cover things like your refrigerator.