Now, the PM has used the entire security deposit to pay the late fees, leaving nothing to cover damages when the tenant moves out today. 

A busted pipe or appliance should be covered. 

If you do choose to allow them to keep the animals I would amend the lease with clauses addressing the pets, charge deposits, and require that the tenants show proof of renters insurance covering the animals if they would cause harm to anyone.

@Heather Rodden the late fee coveres things putting tenants in court because they didn’t pay rent, so if she is late this month put her in court for eviction due to unpaid rent.

If you have done your homework and the property is sound, there should be nothing materially wrong such that a reasonable insurance policy would not cover.If you continue to do your homework and screen your tenants properly, you should have a low risk of them destroying the property that an insurance policy would not cover. 

@Craig Curelop it seems I was painted a pretty picture but thanks for the info.

His report is also easiest to understand c every item marked has a picture with it. 

I did look into a FHA 203k loan which helps cover renovation costs and also a conventional loan.I did some research on a gift of equity and I seem to understand the basics including how it can be beneficial in the sense as I can use part of the equity as a down payment for the home.

My team recently put together a well-researched and handy list of landlord-tenant statutes by state that just covers the basics: security deposits, eviction issues, legal recourse against tenants, deduct-and-repair rights, etc.

One rental was over run with roaches at one point, to the extend when I had an exterminated came, he lifted a rubber mat by the sink, almost 50 roaches ran for cover.