Is there a way to make a property "vandal proof" or should I cut my losses and sell the property.  

I'll look into reducing the property management costs as it seems that's the best option I have, outside of having her walk away from the house and incur a large negative impact to her credit, or selling at a loss and helping to cover the shortfall. 

This lends to going down the path of possibly providing the tenants with financing, installment contract, disguised sales, delayed closing transaction, equitable interest, refunds, lawsuits, loss of profits... etc. 

Now my insurance company (USAA) is telling me that they can't cover it because no one know the cause of loss.

And what happens if things start to go south and take a loss?

Due to health and other issues, I would be the only one who could serve, but it is not feasible out-of-state.

After calculating the adjusted basis and selling the house, you will know your profit or loss and how it affects your taxes.

I will have to fingure out some creative financing strategies in pulling this off with my properties so if anyone has any advice on these areas or if this isn't feasible and i will need to bring in additional partners or investors please share your advice.  

Vacancy and collection loss are very important in either a direct cap or DCF analyses. 

You need the insurance so as to create the Loss Payee clause protecting the HELOC.