In order to paint away the visibility of a section of your Landscape, you must set up the Landscape Material correctly using a Landscape Hole Material.
For information about setting this up properly, you can read about Landscape Hole Materials here.
If you use the Visibility tool without having a Landscape Hole Material assigned, the Visibility tool will remove the Material layers applied to the selected sections,
but will not create a hole in the Landscape itself.
After you have set up your Landscape Hole Material, you can use the painting tools to create a hole in your Landscape.
To create a Landscape hole:
Make sure you have a Landscape Hole Material assigned to your Landscape.
In the Landscape tool, in Sculpt mode, select the Visibility tool.
Find the location on your Landscape where you want to create a hole.
Adjust the brush size to the size you want to use.
Left-click to create the hole and Shift + Left-click to erase a hole that was created.
You can now fit Static Mesh Actors in the hole in the Landscape to create a cave.
To test out the collision of the new hole using Play In Editor (PIE), you may have to switch from Landscape mode to Place mode.