Replacement cost from an insurance perspective is the cost to rebuild the structure if it were to burn down.

Below is list (end of post) from my property manager 2 days ago to seek permission for completely rehab 2 bed 1 bath ~900 sqft unit including all floor, paint, new doors, rebuild kitchen, bath, appliance, etc. 

I do Complete Rehab, water fire, mold damage restoration, mold inspections, (re-builds) drywall, painting, post construction cleaning, carpet installtion and tearouts, new flooring, property management, I have 11 certifications, 2 are Master Certifications.

Depending on the extent of damage it could range from a light cleaning to "bulldoze and rebuild." 

While it is on a larger lot than most around it, primarily a quarter to a third of an acre, there are quite a few other properties nearby that sit on an acre of land.Buying the property straight up and selling it doesn't appear to have any returns, however, splitting the lot into two and tearing down the existing house and rebuilding two new houses could be quite profitable.I have no experience in rehabbing.  

From what I understand, it is technically legal but non conforming and if it were to be destroyed for whatever reason I could not rebuild it as a quadraplex without getting it rezoned to RG.  

If I buy the home may I have to demolish and rebuild?

Dwelling (Building coverage)The limit should be based on the Replacement Cost of the building (cost to rebuild withthe same kind and quality excluding the foundation)2.

On that note, given the two options you stated about the VA loan property (sell it or rebuild it), looks like you will be "freeing" up your VA at that point in time. 

Would I want to re-build the bathrooms only to have a restaurant come in willing to pay to have them moved somewhere else?