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? 

Sometimes we do that to secure a deal if it's a deal breaker, but we don't typically visit the houses.

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.

The rate might not be ideal, but securing the property now is crucial—you can always refinance later for better terms.

99.99999% of all lenders are going to come after the secured asset, not the entity's other assets. 

Also check your states Security deposit laws.

Efficient negotiations secured the property for $158,000 on favorable terms.

Furthermore, if I am understanding things correctly, RE investors use the equity in their properties to scale/secure more investments, right? 

Finding a property, negotiating a deal, securing a tenant, and managing a rental is seriously hard work!

If you're coming back to SD and want to live in the home you have here for the long haul, it's nice security to pay it down.