Wouldn't you be in at least the same place after it was rebuilt (barring changes in he local market I would guess the value of the property with an newly built house to be greater than before) 

Using real world comps & calendars from your personal experience, local PM's, online estimators.

Take a look at the local market and see what some 2bd/1ba homes have sold for and what they would rent for. 

The next steps will involve accurate construction cost estimates by a licensed contractor (or two) and connecting with a lender (possibly current local bank) for construction financing.

Gone are the days where you can buy a cheap 100 year old multi-family off the MLS, turn it over to a local property manager, and make a great cash on cash return out of the gate.

My properties are in three different states and I use local property managers for full-service management. 

Google search some local site in the areas you're searching too.

We're local and we'll come to you.I remember years ago hearing that in direct mail, there's a 3/10/30 rule. 

The other areas give a little more privacy protections but for local investments, that won't be a huge benefit. 

Local vs out of state can mean finding a good PM in both cases or managing the local one themselves.Starter homes are usually good.