Even though I'm a novice at REI, I actually know a bit about this particular topic thanks to my mom who is a buy and hold investor.For each of the residential properties that she owns, she writes up her own lease and lists each and every detail regarding rent, pet policies, furnishing policies, decorating and appliances, etc.

Such as taking care of repairs issues as soon as they come up and giving them small concessions when requested (yes you can get a second pet with deposit, OK I will install a ceiling fan in that room for you).I also had a tenant terminate their lease early.

I would say go with your first thought, and keep them pet-free.

Related threads already have the answers:http://www.biggerpockets.com/forums/67/topics/78889-smoker-rehab-keys-to-success-with-tobacco-smoke--before-after-picshttp://www.biggerpockets.com/forums/67/topics/63695-heavy-smoker-rehabhttp://www.biggerpockets.com/forums/67/topics/83682-what-is-required-to-get-rid-of-cigarette-smoke-odor-staining-etchttp://www.biggerpockets.com/forums/84/topics/88547-intense-odor-from-pets-grease-and-who-knows-what-else-best-way-to-remedy-situationhttp://www.biggerpockets.com/forums/84/topics/29143-smells-like-smokehttp://www.biggerpockets.com/forums/84/topics/90864-smoke-odor-in-carpethttp://www.biggerpockets.com/forums/67/topics/88945-repair-smoke-damage-soot-and-smoke-odorhttps://www.biggerpockets.com/forums/56/topics/81030-need-help--carpet-cleaning-expertshttp://www.biggerpockets.com/forums/67/topics/70662-vent-cleaning-required-on-rehabs

This is why lots of LL don't allow smoking or pets.

A note of caution, if you are using a dark stain to hide pet stains , it's just going to make them darker, will not hide.

@ Brandon I will study what a lease option is@ Ben I will study the negatives as well thanks for advice of renting@ Elizabeth we did keep the security deposit as they had pets in the property and our contract states no pets.

- Do you allow pets?

I would let all 35 of them know what your minimum requirements are as far as income, pets, etc. and then schedule an open house with the ones that qualify.

I've replaced carpet because she was was complaining of pet smells, installed a garage door opener since the previous garage didn't have one and have also had a mold inspector out after she purchased a mold test which came back positive.