Once you have paid off the homes, the excess net cash flow should be enough to self-finance each property's "uh oh" fund and give you access to some of the cash reserves for expansion of your portfolio.

I usually refer them to a local RE agent, give them a link to a FSBO site, or show them how to collect excess proceeds after tax sale etc.

A landlord shall not demand or receive as a security deposit an amount or value in excess of two months’ rent. 2.

It sounds like maybe they give people a deal to manage the place then hit them up with excessive fees for repairs with a company they own or are affiliated with and get a kick back on.The bottom line with this is you are not happy with them and they are not happy with you so cutting ties might be best.

That would be considered excessive by most any court!

He said he has a buyer who has the excess cash to spend on it and can afford to absorb the associated risks.

Would this pose any issues in terms of recovering money from them in the event of non-payment by the primary tenant or damages in excess of the security deposit?

Even though I know I wasn't putting that excess cash to work in other investments, sometimes there is no better investment than being able to sleep well at night. 

What is more probable is that you can be taken advantage of by an unethical lender after the fact through excessive fees that can erode whatever profits was present in the deal but then every material term of the transaction is something you should have had a chance to review before signing.

They are running $200+ per month per property, which seems a little excessive.