I'd run rental comps in the area for similar homes and see what they average out at, and be conservative initially expecting the lower end of what you find so you can give yourself some wiggle room.

Although this is a "tenant will pay for it" - this time, this sets the precedent for other changes that they may want in the future.

Connect, and let's discuss the future of real estate investment.

My current situation does not support house hacking, but maybe I will be able to try it some time in the future. 

From this point forward, no matter what the future appreciation brings, it will reduce the value to the REI. 

If a law is written unclearly or doesn't clearly cover a specific situation, it usually ends up in a court of law at one point or another, and once a judge determines a ruling, that becomes precedent for future cases (that's why it matters if anyone has gotten into legal trouble over this before).

Find yourself a good knowledgeable bank/broker and ask them what to expect. 

Is there someone (possibly a more real estate minded CPA) who we can tell our future plans to and they can educate us on all of our options?

Then I would move on and not expect anything in way of restitution.Count your blessings this person voluntarily left your property. 

You will likely have to earn their trust at first so I wouldn't expect to have a lead after your first meetup but going there consistently and demonstrating your capability can lead to a deal funnel over time.