I don't think there is any amount of savings that could justify the cost of a total tear down and rebuild.

We are at $400 per sqft to rebuild.

I think a short-term fix-and-flip loan would serve you better because, first, the credit requirements are typically lower than a DSCR loan's credit requirements, and fix-and-flip loans will fund a portion of the purchase price as well as some or all of the rehab costs (usually through the draw process).Right now, saving your cash, rebuilding your credit, and finding both a partner (ideally with a higher credit score AND experience) and lender you're comfortable with should be your priorities.

We obviously are in no rush and are in the rebuilding stage.

Rebuilding cost by the insurance= $600kNow logically speaking, FMV should be >= Rebuilding cost. 

I am thinking of adding 2 stories on top of the garage (essentially rebuilding the garage) and adding north of 1000 sqft livable space.

I am interested in connecting directly with investors who specialize in teardowns and rebuilds.

The updates required to renew made the demo and rebuild more economical.  

Yes, post WWII there was a very similar bull-run, because of the obvious down from WORLD WAR, and the obvious rally from NO WORLD WAR and the bizonkers commerce explosion that rebuilding from WORLD WAR made.

By end we re-did the entire mechanical system, EVERYTHING, had brought in structural engineers for the complete rebuild of the 2nd story, our $35k reno went too almost $80k, it was THE nightmare flip.