To me this is a clear case of negligence of the previous owner.  

Hi,I live in Dallas TX and recently I ended up having damages to my home caused by negligence of the HOA.

I actually know a guy who has a bunch of great free forms/templates on his site - I'll send you a link to where you can find his really great template lease agreement.As for insurance, in addition to what @John Thedford mentioned, you should also try to get renter's insurance in place for the tenant if they don't already have it...Without that, damage to the property caused by the tenant's negligence may not be covered by your insurance.

If the decision is about a contract to be performed in Alabama (such as a lease) or land located in Alabama, or a tortious or negligent act that occurred in Alabama, then Alabama law will be used.If your entity is organized is some other state, you must register as a foreign corporation in Alabama.

They did not rehab it as described, and property management was negligent.  

At the very least, the entity will protect your hard work from your personal negligence that you couldn't see coming in your wildest dreams.

Some changes may add value, others decrease value, and some negligible impact.

We want to get this fixed in a timely manner for our tenant but it appears we are going to have to pay out of pocket or use our insurance again and try to take him to small claims for negligence.

However, insurance is limited because it only protects you from one type of liability: accidents/negligence.

I'm looking into purchasing liability insurance as a risk mitigation technique for lawsuits caused by negligence.