I am looking for input on our first development project.We are looking at a development deal in Wichita Falls (Sheppard Air Force Base).

  $5k in lost rental income, $1500 in legal fees, $2k in damage to get it rent ready again. 

You're learning how to scope damage. 

It certainly is an option to turn the units into long term rental if you own just a few.Perhaps the only option.Many of these businesses with 100s of apartment units solely on the Air BnB model will suddenly be dealing with monster vacancies all at once though.It's not at all easy to go from zero to full occupancy in the current market.And tenants may soon begin to default on rent even on longer term leases.Coupled with all the creative financing that makes a scaled larger Air BnB portfolio possible, it's a perfect storm.

Due to the fire the asbestos is floating in the air and is considered hazardous.

Fenced yards, green grass, and fresh air, and maybe cheap gas.   

Read your agreement.If the management company performed the work to turn over the unit and it was due to damage from the tenant, I would imagine they can't just hand you a check and swallow that cost.

We even have some agencies that pay for repairs.Things to watch out for - no appreciation or negative appreciation, evictions, collection issues, tenant issues, and property damage.  

Security deposits can be use to pay unpaid rent and/or damages etc. in the state of wa.

Damage: are they talking scratches, gouges, cracks?