She gets the tax benefits that come with owning the land and home in the interim, including the losses. 

Food for thought, whatever interest rate your paying down is essentially what your making on that money.

Maybe go into the 12 unit with another investor 50/50 and save yourself the headaches and losses later?

In my wife's case it was a totally unnecessary expense - a loss.  

You already pointed out most of the benefits, low interest rate, ease of pulling funds, POF available for all cash offers, interest only payments, no fees.The only downside in my opinion is if you take an investment loss, you need to still make the payments on that loss, thereby compounding the loss.

now we are trying to sell to other rehabbers and eat our loss early.  

Maria,What is covered and how the value of the damaged property is determined by the policy and the circumstances of the loss.  

Your General Contractor's loss should be on his insurance policy.

Give tenant 2 notice the garage door must be kept closed and failure to comply will result in loss of use.. 

You did the first time around, only situation is you priced yourself to low.. you shouldn't continue the loss any longer than you have to you never know what costs may come down the road..