Seeing disaster is all too human, just like belief in the supernatural, or a gloomy disposition even when things are alright.

Remember that in order to qualify for a 1031 exchange, both properties must be investment properties and the replacement property must be of equal or greater value than the one sold.When to consider a 1031 exchange?

I can't imagine this is legal in any state (as written), I would assume they are saying that their admin fee is equal to 35% of the security deposit, which is quite excessive in high-rent cities.  

And, I totally agree with all of that which, confirms my fears and beliefs a bit more with your comments. 

Each STR property I acquire must meet two financial benchmarks: a gross rent multiplier (GRM) of 5 or less [Property value divided by projected income must equal 5 of less], and compliance with the 1% rule as LTR, which serves as a backup if regulations shift or if there's a decline in STR income.

But equally important for you to think about is going to be the allocation of your net proceeds in the purchase. 

But most of us are stymied by our beliefs so it is good to get us to rethink our views of money.

Option 2, you risk $30K with the belief that the unit will begin generating some free cash flow. 

I would respond equally bold, up the pressure and make sure they understand you are not a pushover.

If all of you are equal members of that LLC you'll all have equal authority.