Near impossible to find any property that is $500k and rents for $4000 a month instantly... unless it is something with like 5 or 6 rooms that you rent out individually, newer house, good relatively in-city location.   

Try to go through this as soon as possible, it will kick start your knowledge (in case you're a beginner, I'm not sure):https://www.biggerpockets.com/real-estate-investin...I'm  also in the same situation as you, and I've been in "guru" classes, meetings, etc. and believe me, there's nothing they provide that you cannot get here for free (or a couple $100's), with such a great community in the forums, the podcast, the webinars and instant replies with a wealth of information.  

Is the smell a big enough problem to pass up that much of "instant equity"?

I have a decent amount of money saved up and have a few controlled(can be paid off instantly) lines of credit to keep improving my credit score.

Smoke smell is a royal PITA to get out of anything, and non-smokers will smell it instantly. 

For instance, if we took the plunge on that property, we'd have to stay there for the long-haul, as it would be much harder to sell than our current home.Additionally, what's the reality of instant equity in such an undervalued property?

He had to get his skills up.I was there for him, monitoring a bunch of his calls and giving him instant feedback throughout the day. 

We recently enabled Instant Booking on VRBO for a seasonal vacation property.

After reading books like the “Millionaire Real Estate Investor” by Gary Keller, and “HOLD”, by Steve Chader, Jennice Doty, Jim & Linda McKissack, the general train of thought seems to be buy the property with no less than a 10% below retail to achieve instant equity.I’ve been experimenting with some scenarios to see what my best offer might be on a deal.

It's free, instant, and very user friendly.