I know in the long run i.e. 5-10 years I want to have transitioned into the buy and hold strategy in order to provide more passive income.

then you will have the cash to complete the exchange.1031 exchanges are the tool to continue to defer the tax on your gain and to transition into passive assets until you pass the asset at death at a step up basis and the tax disappears for your heirs.Installment sales will allow you to slow down the recognition of gain but not defer indefinitely.It's difficult to mix the two but can be done with some sophisticated planning and some outside resources.

She will be transitioning full time into a "real estate professional" for tax purposes.

I am now looking into transitional funding and looking into other hard money lenders.

I don't want to transition to real estate full time as I really do enjoy being a nurse and helping others.

It is transitioning but not that quickly. 

Giver her 30 days or something like that to transition to a different living situation.

Start residential and learn everything I can about commercial and transition into it.

Your plan may cover all of the strategies you touched on, but over a longer period of time with definite transition points. 

They are very often ready to downsize or transition to assistance.