Thank you all for your wisdom, it seems consistent that the Heloc for a deposit only makes the most sense. 

Did you get the security deposit from the wholesaler?

At least in NJ its straight ad valorem, with the various tax assessors updating assessments in a periodic hodgepodge way...Pre 2007, our attorneys did the closings and the brokers held the initial deposits. 

That article references California.2nd, I believe it's a misinterpretation of the new California security deposit law which limits security deposits to 1 months rent.

My question is, is there anything more I need to do to (i.e. issue a formal written notice of lease violation) in order to prepare for the possibility of keeping a portion of their security deposit to pay for eliminating the odor? 

Any online method i can ask tenant to use that can deposit the amount to my bank account which is free for tenants and safe method for me to use. i had issue with one of the check send by tenants (not a tenant fault)and i was about to fall into scam as i tried to deposit the check online but now want to stay away from Checks. venmo/zelle doesn't allow bigger amount transfer.

Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.

You also have to have a system in place to vet your guest (which Airbnb doesn't do anyway - all they do is "verify" their identity), create a lease agreement, accept deposits and payments and issue refunds of deposits.

They continued to send me letters asking me to return their deposit.

Also check your states Security deposit laws.