Purchasing the other house to demo and reconstruct an 8-10 unit MFR would generate much more income for the long run, but we would have to put in a large initial investment and take quite a hit in terms of time.My main concern is that I have interest in demolishing the house and creating a multi family residential, but we are totally new to this so I don't think it'll be a great idea.

If you have the building insured for less than the full reconstruction cost amount - say the estimated amount to rebuild is $150k and you have it insured for the same $100k - they will probably just cut you a check for the full $100k since you are insured for less that what it will cost to rebuild (the way it was not the newly required elevated construction)In addition to those examples above you could ask for loss of rent reimbursement and if you are forced to have extra cost to rebuild up to code (elevated) then you may have Building Ordinance & Law coverage that could pay something towards that extra expense.

Recently I was asked for a historical rent roll and we can't produce it - I can reconstruct by hand but very painful.

I now need to develope it and it is costing a little more than I thought due to the state DOT dumping a bunch of stormwater on it from 3 ditches for 1 mile each and 7 lanes of highway for 1 mile each.....this was not disclosed to me by the seller nor was there any easements for drainage recorded on this property when the highway was reconstructed 14 years ago adding these ditches and additional lanes of roads.Once it is developed to level buildable land, I will be selling the other piece for a decent profit but need to spend more than anticipated to take care of the drainage issues.  

However maybe you can find an angle to chaage the floorplan without massive reconstruction.

The insurance agent came back with a reconstruction cost of $167,300. 

They help land tenants, reconstruct the building, handle contractors,etc.

I know a lot of older homes in my area that the county will not permit to renovate/reconstruct because its elevation is too low.Good luck!       

She insisted that she could not live there while reconstruction was being done.

Short vision, damage will be cleaned up and reconstruction can be made, but longer-term will those business's leave?