Do not buy something (a rooming house, for instance) that is 'grandfathered' in because if it burns down, well, there's no rebuilding it.Speaking of zoning, beware the two groups who control it: city hall and the voters.

The more intensive the more expensive it gets as they gut everything for that area and you have to rebuild.

Borrowing from car loans to credit cards and everything else will become more expensive until time goes by and you rebuild your credit history.To me your thinking is once this expensive house I have is gone from the short sale then might debt to income will not be so bad.

@Justin Mayet, maybe it's changed, but here is the  following quote for fdic compliance https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf :Amount of Flood Insurance Required The minimum amount of flood insurance required must be at least equal to the lesser of the outstanding principal balance of the loan, the maximum amount available under the NFIP for the type of structure, or the insurable value of the property.Unfortunately, it also states somewhere in there that a lender may require more depending on their own business practices, but cannot require more than the rebuild minus the land. 

In a land-locked location exhibiting economic growth pressures, the equity appreciation warrants a complete re-build (the right way) of a 1920 house.

I would say tear off trusses and rebuild roof.

During an earthquake the house became damaged and new city ordinances prevented them from rebuilding the house and they still owed on a mortgage for the property so they were on the hook for the mortgage but could not use the land or live on it anymore.

It takes time to build a solid foundation, but less time than to rebuild if you skip the first steps and your financial house comes crumbling down.

I had one month that was about 10k as 4 (yes 4) different HVACs failed/installed, a staircase rebuild, and plumbing issues.

They won't require you cover the place for what it would cost to rebuild it.