I do not want to sell the unit.How can I preserve the tax free treatment of capital gains during those five years?

These are easy to separate out for tax treatment.  

The strategy is best described in Joel Greenblatt's fantastic book, and an outstanding practical guide and tool for executing it can be found over at the Magic Diligence website.You can do either (or both) of those using the "leverage" of Options, allowing for substantial upside potential compared to standard stock purchases, with dramatically reduced downside (if you want a no-hype education on Options, Erik Kobayashi-Solomon's book is great).Those with the patience and inclination can indeed use Option trading to make money in any market condition (Wikipedia founder Jimbo Wales, Amazon's Jeff Bezos, and "Black Swan" author Nassim Taleb all spent time -- and made lots and lots of money -- as options traders in their careers).For even more leverage, you could of course do any of the above (and much more) on margin (meaning your brokerage lends you money to do the investment), though that's not something I would ever do personally.Also, if you focus on holding stocks (or options) for at least a year, you benefit from favorable tax treatment of the profits.

Yep, those of us with assets get special IRS treatment.

I am told they don't offer any favorable treatment for multiple properties, is that common or are there landlord friendly co's that taper their pricing?

You will want to balance this treatment with your DTI needs, which is a critical decision.  

If mold gets on the wood there are treatments to sand and coat the wood that make it hard  for mold growth to re-occur behind the drywall. 

How long has the tenant been receiving treatment for this specific impairment?

Kilz prime all walls and do ozone treatment before you start to replace any of the stuff you've ripped out..

Once they tell you what you're looking at as far as breed/possible treatment recommendations you can decide if you want to do what @Jeff B. said and take the first one and issue a warning to them about any further issues.