In Wa state we collect first and last plus the security deposit I can use last months rent and the tenant can replace it when the opportunity arises, I have not figured that out but all my tenants paid their last months rent at move in we will see how this all shakes out.

The water heater was over the shower area and must of blown and did some water damage, so i will need to replace all that OR should i just rip out the shower all together.

It fits well into my plans and, I guess in the long run I am looking at replacing cash flow.

I am looking at it long term to replace my household income.

There's no such thing as a free lunch obviously, but if she's busting her butt trying to get a temporary replacement job, offer to defer her rent one month. 

How do we capitalize expenses (whether the above losses, or things such as replacing an AC or flooring)?

If you can't get cooperation with your current trade you will have to replace them and be more diligent with the new one.

Are you replacing in LA? 

I’m redoing my kitchen and replacing a tile floor.

When I walk into a house, I can't tell if something needs replaced unless it is obviously damaged.