Only retiring with rental property is a asset allocation risk.

It just means you bring less cash to the lawyer or title company and allocate some of that into the Security Deposit account ... it's merely a virtual paper exercise.

Your other two options are solid options as well but it sounds like they require you to use your entire allocated amount of 40k.

Since I do a lot of deals, I allocate money (my own and my investors) to different properties.

Woulda Shoulda Coulda allocated a bigger portion of my investments to cash flowing real estate when I first started out (2010).

We do the same and I think a lot of people who say they don't have money to invest don't realize that they do have the money... it's just being allocated to something other than investing. 

I allocated 133 in back rents owe but with the turn it can be used for snow removal or other misc expenses.

So does the pay roll.If you do the math, and you bother to allocate proper $ amounts to all of the line-items, you should realize that $500 is just not enough to cover all of the bases.

I know that every transaction in my management group is directly allocated to a property with a paper trail (literally every nickle of every transaction).Would that not make this an easier sell (to keep the assets in separate LLCs and run the transactions through a managmenet LLC).If the paper trails are strong, then wouldn't it work fine?

During the "Mastermind", deals and strategies are discussed, but 90% of the time is allocated about doing "preforeclosures".