It sounds like you know how to avoid this in the future, so what to do with the situation at hand?

@Joseph M. prices have certainly gone up with the rest of the country through this great recovery since the financial crisis.

My options are very limitted and the situation is very draining even I follow the bigger pocket advises and I unvested a lot of time in learning and also have years of experience with tenant.

How do I protect myself in this situation, while also helping a relative? 

For me, I am a little hesitant because I would be in a situation where I would be trying to secure traditional lending (which should be very feasible given credit scores & what $$ amount I am pre-approved up to from my banks), meaning that I assume I would be forced into using my first-time homebuyer loan incentives.

Real Estate Investing can be an exciting and rewarding venture, offering the potential for significant financial returns and the opportunity to create wealth over time.

Offering 50% of the cleaning fee for cancellations within 48 hours seems like a fair middle ground.You might want to set up a clear policy with her going forward so everyone’s on the same page for situations like this.

We've never had any issues whenever we submitted a claim, and they would take care of the type of situation you're dealing with.  

A good tax accountant can save you thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.I recommend finding an accountant who specializes in business taxation, financial planning and tax planning.I would also recommend looking for a accountant willing to work with you throughout the year.

And yes this is a 1 in 1000 situation but plenty of other disasters could happen and having the right insurance policy is huge to protecting down side risk.