We put $120,000 in reconstruction.

You have to track the hours your spend on various real estate activities (development or redevelopment, construction or reconstruction, acquisition or conversion, rental, management or operation, leasing and / or brokerage) and they have to be more than 750 hours and it has to be more than 50% of all your business activities.  

Real Estate ProfessionalTo be a real estate professional, an individual must spend the majority of his orher time in real property businesses:• Development or redevelopment• Construction or reconstruction• Acquisition or conversion• Rental• Management or operation• Leasing• BrokerageThe taxpayer must meet each of the following two time requirements:• More than 50 percent of his/her time working in real property businesses;AND,• More than 750 hours of service during the year."

It is 4.5ml 50 year special assessment - a huge building reconstruction project.

First, you would want to make sure that you insurance covers full replacement cost so if anything were to happen you would get paid out the cost to reconstruct something similar otherwise your insurance payout would likely be less than the cost to build.

So if you can reconstruct the house to be a single-family, with just one ADU, and you are willing to live in the house that could be you best bet at saving your investment.Another option could be to contact a construction attorney who is involved in projects requiring more complex permitting or zoning applications.

Seller paid for removal and reconstruction What was the outcome?

Is the $3800 just for repairs, or would that included the cost of an entirely reconstructed deck?

Insured people with major claims often need to temporarily relocate while their homes are being remediated/ reconstructed.  

Unless it is a fairly new HOA, you should also be sure to have "ordnance of law" coverage, which pays for upgrades to any reconstruction required by newer building codes.