The best looking home has paint peeling off the building and damaged windows.

Slightly damaged tenants CAN be the best tenants because their options are fewer and some are grateful that you can look past the corporate extortion by credit reporting agencies.

I'd consider that a relatively cheap lesson to learn, pay the tenant what's in the lease less any damages and chalk it up as something to know better for next time.

But, there's no deal on here, based on rental income, it's negative cash flow with only minimal repairs, and the occasional vacancy, let alone major repairs/damage.

The property has fire damage so the kitchen and a bedroom need extensive repair and update. 

Save time, money, brain damage and possible trouble and just say next. :) 

I'd also suggest buy an umbrella insurance that'd cover you for damages beyond what your normal insurance policy could cover.

If either of you don't have insurance if something goes wrong you sue for damages and slug it out in court.

The spirit of my criteria is to keep from ending up with a menagerie of animals being moved in damaging my property.

Your contractors should have their own policies that cover damaged/stolen materials throughout the construction process, but if somebody vandalizes the building or injures themselves on the property, you would be open to liability or cost of repairs.Hope that helps!