Would a home equity loan be a viable option in this situation, especially in regards to eliminating some of the red tape I'm running into with a refinancing an scorp-owned property?

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As you get to this point your gaining more confidence in the options because you know option A and B had a certain outcome that wasn't option C, and this would give you more confidence you're doing the right thing for you.From there, I would be identifying properties to acquire if you don't already have some in mind and then my next sheet is creating the plan.

My vote is option one.  

Don't be so quick to indebt your paid off townhome until your learn creative financing and review all your options.

Today I had a heater issue and snow company that was late handling commercial before residential so we ended up clearing it.Open to each option.

Assuming they're telling the truth what are my options.

House hacking is probably your best option.

So before dismissing your options, you may want to consult an investor friendly Lender who is an out of the box thinker.

So all of the gain and depreciation recapture are initially still tax deferred.However, like Joe said, the down side is later when sold  you lose the 1031 option. the client will pay tax on all gain and depreciation recaptured from before the 1031 also.