What are some ideas for collecting those security deposits to protect myself, since I am not comfortable with not having that in place in case the tenants suddenly cause damage?

I can tell you from personal experience, college age renters have very low expectations, and will likely damage anything you finish the units with.  

L&I deemed the place unfit to live because of the damages, we escaped the inferno without any bodily harm and went to stay with my daughter until we found suitable housing.

Is the tenant at fault for these damages?

If she says we'll my lock malfunctioned and I couldn't get in she still should have called you prior to attempting to break door down to gain access.In my opinion she is  responsible for the damage she caused to the door and I'd charge her.I'd take photo's if she says shes not going to pay.. let it ride till she moves out and take damages from security deposit. 

The home has fire damage, evaluating this property will be tricky, as you don't really know how much damage has been done to the property, in addition, the home  was built in 1964.  

Question is - what happens if there is significant damage to the house before we do close?

Or I could say nothing and just take it up when he moves out and address any damage through the security deposit.Or I could allow the pet with a non refundable Pet Fee that still allows for damages to be taken from the security deposit, making the Pet Fee a payment for breaking the rules of the lease.

Raising mechanicals can help lower flood insurance rates as they are less likely to be damaged by flood water.

You cannot recover legal fees on a residential lease in Ohio.There are 2 "causes" in eviction cases, first cause- the issues of possession; second cause - money damages. the second cause takes the place of any need for small claims court. i would find an attorney familiar with the eviction process.