Second, military tenants can move out at the drop of a hat, so there is some higher vacancy risk.

It is far better if the landlord just lets Tina out of her lease, and accepts Sam as a new tenant.Or, the landlord might let Tina out of her lease, accept Sam as a new tenant, but also require Tina to guarantee Sam's lease for the final six months (using my example) of Tina's lease term.Either one of these accomplishes everybody's goals without getting into messy technicalities that come about with a sublease.Most leases contain prohibitions against subleasing without the landlord's consent.Many leases charge a one-time fee if the tenant subleases, or is let out of their lease and a new tenant accepted.That is because the situation causes extra work and risk for the landlord. 

I'm conservative by nature and like low debt and low risk, but also realize this can limit you from scaling up.

So you cannot take that risk, I recommend joining a team so they can feed you the business and teach you good habits, OR become a property manager.

The decision will partly depend on my risk tolerance.What's everyone's thoughts on a HELOC vs savings for CapEx? 

If you increase your rents annually you have less of a risk of losing tennats due to large rent increases.If you have not raised rent for 3 years you are way below market.

Also you can look into Us Assure (builders risk nationally )and AU Gold(Lessors Risk, Builders Risk and Vacant properties Except in NY) those two companies specialize insuring vacant/rehab homes.

For such a short term if the plan is to sell after that 6-8% per year if they are good risk?

@Ron S. even though CA law says 5 days and full payment needs to be made this can be waved by the bank.. they are not obligated to though as you so correctly point out.basically you need to do these deals outside of escrow you need to know how to do your own quick search and take the title risk.. then you get the seller to sign a grant deed over to you and you go record it.. then you get your funds wired or cashier check couriered to the trustee.that's how we did it.. not enough time to use title company.. that's why its so profitable if done right 98% of your competition simply can't do this  either lack of knowledge or lack of funds or both..

Learn on your own dime first, before you risk someone else's!