A good property manager can help with tenant screening, enforce lease terms, and handle evictions more efficiently if it comes to that.Require a Larger Security Deposit: Within the bounds of local regulations, a larger deposit can provide a cushion in case of damage or unpaid rent.Consider Rent Guarantee Insurance: Some companies offer insurance products that can cover lost rent in case of tenant default.

I just had tenants move out of my investment property (duplex) without paying for the last month's rent, and the damage they inflicted onto the property exceeds their security deposit amount.

deposited in a demand deposit account?  

Ensure the buyer provides a non-refundable earnest deposit.3.

Give her 30 days notice now, keep her security deposit, and send her a additional bill for damages to the unit in lieu of taking her to court for the damages.  

Im assuming that is what would catch any errors in owner distributions, deposits, profit/loss? 

Did you collect a pet deposit?

Now, over a year and a half later, he sent a certified letter last week demanding the security deposit or legal action within 30 days.Please advise. 

Pets are not against the lease it's just that they're allowed upon approval with a deposit and I did not give approval.

I highly doubt Paces team does anything more than sell you his system.. no way they are vetting potential borrowers of small EM deposits  :)  many beginning wholesalers do wholesaling because they have no money or credit or credit is tarnished etc.. this is ultra high risk en devour to be loaning money like this to people you are meeting on line..