Determine the billable items for the final accounting on the return (or retention of their security deposit.)

Don't waste so much time upfront until you have secured the option to purchase the property.

I have a good idea of how I want to get there, I’m just curious of other people’s paths to get there.My original goal with real estate was to provide additional income for retirement; have a couple paid off houses and help supplement retirement income from my 401k, social security (if it still exists), etc.

The lender is secured and will be paid at sale closing by the title company from your sale funds.

It seems to me that you would rather a secure financial position than to leverage your assets to make to increase your cashflow.

Read your local building/zoning/permit codes, and speak to someone 'downtown' about the situation without giving them the actual address. 

From there if there are any deductions that stem from the walk through provide an itemized list of any charges they will incur from their security deposit complete with pictures of any infractions.

The owner has an ADT security system in the house.

Grouping activity should be evaluated and done carefully as you cannot release suspended loss by disposing just one house.This is complicated part of the code and you should sit down with your professional. 

I have enough capital saved up for a down payment but will look to get some type of loan (either FHA or Conventional) and will be looking to work with local banks to secure that.