Rent or Sell old primary residence, 2 of 5 rule and some other Qs

[Scott M.]

My wife and I moved to another state for a temp job (medical residency) two years ago this May. We own a home in another state that we have been renting out with the intention of moving back. Now it is looking like a good chance we will want to stay in the new state due to job opportunities and that we actually like it here. So unless an awesome job opportunity comes up in the other state in the next few months we are looking to sell the house.

• Owned the house since 2011, was primary residence from 2011-May 2016. The property has appreciated ~120k to date. Since we last lived in it as a primary residence in May 2016 and rented it since then, under the 2 of 5 rule we have until May of 2019 to sell the house and avoid all equity gains tax. Is this correct? Does this apply to both state and federal taxes?
• If we will owe tax can a 1031 exchange be used to roll it into another primary residence or investment property to avoid this tax burden? 
• The house is valued at 260k-280k but we are only able to rent it for $1450/month. It is cash flow positive to the tune of ~$650 a month if you include mortgage principal payments ($250) but not including long term major repairs. We have determined that this does not make it a good investment property. Agree?
• Alternatives to using a standard realtor? Since we do not live in the state I'm not sure what other options there are like if we could sell it by owner and hire a fee-only person to show the house?
• The house needs some maintenance. Mostly it could use new paint, some basic landscaping work and new carpet in a couple of the bedrooms. Any advice or references on what work would provide the highest ROI on selling price? If we do sell we will have ~ a half years worth of rental income, would these improvements to sell the house work as a deduction against this income? Not sure how this works when combined with the 2 of 5 rule
• Any other general tips / resources for getting the most out of selling this property would be appreciated!! Thanks!