When your tenant negligently burns down you $250,000 rental the Landlord and the Landlord's insurance company will be happy to file a claim on the Tenant's Renters Insurance.True story:  I just finished re-building a $220,000 rental house due to a fire. 

It doesn't quite meet the 2% rule and only seems to cash-flow $350 over the long-term.My current strategy to raise rents is to add a bedroom and bathroom to the main house by rebuilding a four seasons room and bringing it level with the rest of the house turning it into a 3/2.5, but that will also require altering the roof.

Even if your insurance covers the cost of rebuilding, it may be difficult to find new tenants because people have already moved away.

This will be a complete demo and rebuild and looking for a 80% LTC. 

Also looking for any general contractor referrals as well that can handle cosmetic rehabs or complete shells/rebuilds.

I have seen houses in all kinds of conditions (animal hoarder houses or mold damage or fire etc etc)  for sale (usually off market & directed to an investor buyers list) and there is an investor market for fixer uppers and houses in bad condition or for just the raw land for a rebuild.

You will most likely pay more for a property than it will rebuild for because inusrance is not concerned with land value or the rising and falling of the market.

Lots of people tear down and rebuild.

Obviously this only works with repairs that are quick... doing a complete kitchen demo and rebuild isn't likely going to happen in the 8 hours they're gone.

I wanted to rezone and put a repc on t and sell it off to a contractor that would want to rebuild it.