My buying parameters require 1995 or newer units and sellers want a fortune for them.

Fortunately rates are low and equity pay down is significant so you likely are not really loosing money if the market was flat. 

If you are seeking out asset accumulation and equity appreciation over the long term then there are certainly fortunes to be made.

I was fortunate enough to work with a great real estate agent who i found on BP who was able to connect me with a list of contractors their real estate team has seen other investors use. 

Fortunately we didn't have to go to court to get them out.  

We were very fortunate!

The HELOC has doubled this past year or so, due to variable rate, but fortunately the rent still covers costs at the moment.  

Construction cost a fortune in the Bay Area, not to mention design/engineering fee and permit process.

I hear a lot of talk about how wonderful and how easy the SW belt is at making big fortunes with huge cash flows and multiplying profits, but never hear about the realities of investing here and what the market is actually doing "today", which is a far cry from what I'm reading about.

I've fortunately not had this specific scenario yet, but my two options I've given myself are 1) if it is totally unusable I'll offer to rebate the number of days for the tenant at a prorated rent on next month's rent they can choose to spend their savings on a hotel or they can stay with someone else it's 100% their choice (I don't want to pay for a hotel since then we have to agree on what standard of hotel is acceptable) 2) If it is partially useable and they are willing to be accommodating like Nathan said I'd provide a gift card or two for dinner etc.