While I could sell both properties and turn a large profit, avoiding ongoing maintenance and property taxes, I’m also interested in holding on to both properties as long-term investments.I’ve thought about possibly doing a full demo and rebuilding a custom home in Carlsbad for personal use or to sell down the line for a significant profit.

This could be a massive undertaking (ask me how I know) Ouch, I love rebuilding property but I definitely don't want to get hit with a condemnation order. 

This amount fluctuates, typically peaking before a property purchase and then gradually decreasing as we rebuild reserves for the next opportunity.

Does this seem reasonable ideally I could insure it for value vs rebuild cost?

It will take many months to remediate and rebuild.

It will take many months to remediate and rebuild.

Hoping to have some money left to rebuild my portfolio after selling the house and paying off the debt and loan.  

They often have no choice but to stay and rebuild with insurance money. 

Some of my rentals are grandfathered in, but are in areas where re-building would no longer be permitted. 

If you start in your market now and then transition later.. you will have to rebuild your entire network and start over with your knowledge on the selected market.I suggest looking into OOS investing.