@Alecia Loveless, I think what you have to lose by taking an action like that is potentially deducting the value of those items from what they owe you.

Make sure you understand the monthly deductible, and that the rent and maintenance guarantees don't kick in right away. 

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

If you switch the property to personal use as a vacation home, you would no longer be eligible to claim rental-related tax deductions, including depreciation.

The interest is deductible.

Turned out their earnings are so large that they hit limits on what they can deduct on their tax returns.

I guess the only good thing about a prepayment penalty is that is is considered prepaid interest on your 1099 statement which may help with tax deductions.

Can I deduct any expenses incurred throughout the entire year 2023 for that property such as utilities, insurance, repairs, mileage, maintenance and improvements?

Proper HOA Reserve Funding will determine whether or not your fees make a dramatic increase or a Special Assessment is levied in the near future, both of which will immediately, and negatively, affect your investment planning.

From what I understand, seller concessions are like closing costs and commissions and are deducted from the sales price to calculate the capital gains.