Non-retirement accounts that are investment vehicles (stocks, mutual funds, etc) will count at 70% of face value. 

There's nobody to tell us what trees to cut, what colors are acceptable to paint the home, when to mow our lawn, what kind of vehicles can be parked in the driveway, where to place our garden hose and trash can, etc.

I'm 19 and about to buy my first 2-4 unit apartment but haven't yet, however if I could of went back a few years with everything I've learned now just make sure you're always learning, reading, etc, don't spend your money on stupid things like cars and clothes, if you get a job and keep saving you should have money for a 5% down payment on a property by 18 or so, if you're going to college you can buy a 2-4 unit (duplex-4 plex) or a cheap house and rent out the other rooms, that can go in general too not just with college, and don't buy a brand new car, get at least 3 years old because a car loses 40 percent of its value over those years, you can get a very low mileage older car if you hunt for it, new cars are financial suicide to young people, ideally don't spend more than 10% of your income a vehicle per year, that may be hard depending on what you do, and invest every penny you can while maintaining a safety net (at least a couple thousand dollars to cover expenses, etc) that way you don't have to pay abhorrent credit card interest rates.etc

Do you know any other investment vehicle that allows you to completely eliminate taxes on gains? 

Since this concerns your retirement, I personally would not 1031 exchange into an investment vehicle that you do not fully control yourself.

Agree with @Brent Coombs and @Joe Villeneuve, easy to manipulate those numbers and those rules are really just a for a fast analysis of a property. you are better off doing your due diligence and running all your numbers. after researching the area market and running the numbers, the main area i like to focus on is the COC return. the COC will tell you how much you will earn based on how much you invest in the property, just like any other investment vehicle out there but with Real Estate you can earn money in different ways, not just not like an interest bearing account or stock market where you hope the stock will rise in value.

or should we open a Self Directed IRA and use that as a vehicle?

For example I have managed 13,000 vehicles in fleets and millions of dollars in other assets.

I hope to use REI as a vehicle to teach them about the value of hard work, money management, and investing ... my thought that these lessons will be much more valuable than the assets themselves.

I would suggest your decision to join a REIA is similar to buying a new vehicle.