I had a remediation crew come out to remove the water damaged areas, suck up the water and dry everything out.The insurance adjuster then came out to record everything and just sent me an estimate for the damage of about $4700 (minus the $500 deductible).

There is a new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies.

It's not tax deductible like my other loans but the rate is so low that it doesn't make much difference. 

Everyone will be a little different.You should be able to deduct the interest off the Heloc since it will be used for an investment property.  

@Peter PitroneShow all receipts of all the repairs done to the property to get maximum deduction.

We can look into auto coverage and rental coverage, but they want us to pay any deductibles.

I have sent the security deposit back to them in a timely fashion(which they already accepted) and only deducted 1/2 the cost of damages in the property since they were so cooperative in their move out, which I regret already.

This safe harbor does lay out some important tax treatment structures for how and when you can deduct mortgage interest, and take depreciation and offset expenses with income. 

@Levi LewisNorth San Diego county has one.

Levy their bank account, have the sheriff seize their assets for sale (with a judgement).