Otherwise, you're still insuring the structure from loss. 

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?

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

NOT the bottom .. the bottom are trouble long term.. the top are usually the best tenants.let me explain a little and I am stealing this one from Chris Clothier.rents 600.. to qualify you need 3X  that's 1,800 a month.. that leaves 1,200 for the rest of your bills. so they are living week to week on little upset and your not getting your rent.now take 1,200 rent  3X is 3,600  now they have 2,400 to live on for the month.. we all eat the same food pay basically the same in UTLS.. and gas is gas etc etc. who do you think long term will be more stable.

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.