Aside from having to put 10-20% down to secure the loan, what can I expect to encounter when dealing with hard money lenders in terms of interest rates, points, getting the funds from them to pay contractors/buy supplies, etc.

Other options might be finding a partner who wants to develop the land (if that is possible) and building a regular home to sell or rent when complete.

While anyone with the proper securities licensing can sell them, your typical financial advisor doesn't know real estate. 

I also have a regular full time 5days/week job on W2 at company X (single office, no secondary/client locations). 

AirBNB is taxed at regular income not passive.   

He adds they haven't really lived there in two months for more than a couple days because they feel sick there.- Today we offer to terminate the lease for the remaining 3 tenants but we hold remainder of the security deposit.

Another thing I failed to mention above is that many people out there are in a safe and secure position e.g. they have a job with a regular paycheck.

Is there a way to legally require a larger security deposit?

I would do 2nd mortgage with the interest as high as allowed by your state to secure your investment and the balance of the promised return should be in your JV agreement in the LLC.

You could then use that $95k to secure financing for another $300k in property.