I'm going to go through the process and file a claim to see where this takes me, but would I be able to demand the HOA replace or repair my cabinets if insurance doesn't cover it? 

And as far as a future 1031 exchange - If my intention was to to roll these funds into another flip, and roll those funds into another one, my understanding is I would need to have the NEXT property to flip already claimed to do a 1031 exchange? 

You won't be able to claim the lost income from missed opportunity costs.Best strategy is to let the borrower sell the property.

What they took was the nearly $7,000 profit after all expenses were paid back at closing After claiming there was miraculously $7,000 of expenses that were needing paid back prior to me coming on board that was never once talked about in the nearly 7 months of working on the project...

Oh, I have bought many properties in this situation.Here are my pointers/lessons learned:1) Make sure you understand the deposits and they are included in closing2) Make sure you understand your state laws on giving the tenant notices to move out3) Try your best to communicate with the tenant some will freak out when a new landlord is added.4) Get a copy ownership to the new tenant and make sure to get keys5) Inform new tenant by your state laws you need to do repairs and get pictures before damage is done that they claim was pre-existing....bs.6) Be nice but be strict when it comes to paying on time, they will test you.7) Hope for the best, and prepare for the worse. 

I gave him books like the tax and legal play book by Mark J Kholer, I can advise him on what to do once hes made money but I cant seem to find a step by step starters guide on the very basics of claiming and paying his taxes.Any Book recommendations?

It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estateUnderstand you can not eliminate all risk, only mitigate it.

She said no court of law would uphold the neighbors claim.

I know you would want a professional pool company to maintain it in case someone claimed your chemicals, or lack there of, made them sick.

I was going to actually answer this and help ... then I got to the part where you were trying to use a break in as an excuse and claiming the management company is somehow supposed to be your personal security company.