BUT regardless of that, the numbers should still match your original term sheet!

The value of the property skyrocketed from the original $125,000 purchase price to an impressive $300,000.

We got $11,000 in credit from the seller that paid closing costs & bought them a lower interest rate closer to 6% vs. the 7% that was originally offered. 

I was originally planning to put all my monthly returns to pay down the HELOC as quickly as possible so that I can get into the next property but am worried about how to deal with paying the taxes if I don't allocate any of the returns to the side.

:P There isn't anywhere near enough information in the original post to provide specific advice so I asked the poster to reach out.  10,000 foot overview the best advice would be to speak with a knowledgeable INDEPENDENT insurance agent and be as forthright as possible with your situation. 

The original price still seems steep especially for potential tenants who may not even sign a lease. 

Can I 1031 exchange into  5 100k down payments for 5 properties that are of like kind but lower value than original property?

Long story short, the total all in construction costs should have been $245k and I originally was going to list for $330k.

But a bigger benefit is that your original VERY LOW offer with Terms very favorable to you might actually be accepted.  

I have been told by one very reputable RIA and a separate 1031 company that after I have been in the REIT for at least 1 year that I can pull up to my original basis out of the REIT without triggering any capital gains tax.