In one particular circumstance we had the same tenant intentionally damage their heating system and then calling in a complaint. 

Unless you have unusual circumstances such as a month of DIY repairs on one of the houses, your wife would need to find more real estate work for herself. 

How does this new law address the distinction between wholesaling and a net listing?

.,) relative to all other applicants, but after showing them the property you have the distinct sense they'll be a difficult, high maintenance/game-the-system/treat-your-property-poorly tenant.Essentially: how do you stay on the right side of the law rejecting a tenant that appears to be the best applicant on paper, but to whom you don't want to rent based on unpleasant personal interactions or impressions that they would likely take poor care of your property?

Best case under such circumstance is they find alternative financing and simply over paid for the property.good luck

First off, the deals we are using the LOC for are solid, profitable deals even in the worst of circumstances.

The discrepancy between the monthly payment with 20% down and the monthly rents was mind boggling for me.Let me know what you would do to maximize wealth under these circumstances.  

However, this is not specific legal advice to you, just an opinion based on the circumstances described in this thread.  

So, while on the surface it sounds like you are entitled to your money back, a closer look at the contract and circumstances is needed to verify that.

Would you consider refunding or crediting the pet deposit under these circumstances?