If done right most of these gains are tax-free- $40K in equity capture (profit) with $20K out of pocket and 13% cash on cash thereafter (300%+ returns)- $24K of equity capture with $32K out of pocket and 36% cash on cash returns thereafter (75%+ returns)- $41K of equity capture with $27K out of pocket and 12% cash on cash returns thereafter (150%+ returns)None of the above numbers include loan pay-down or appreciation. 

Depending on the loan amount for the new property, roughly a little over half of the gain could be deferred through the exchange.Without a 1031, they’ll face taxes on the entire gain, including federal capital gains tax (likely 15% based on their income), California state tax, and depreciation recapture, potentially totaling $130-150K.

The problem is that the new lender will not allow me to quit claim the property back to my LLC now that the loan is done.So I have to rely on insurance only which is terrifying to me.

Start by talking to a bank/loan officer to see how much you can borrow. 

We are in Los Angeles, and although we do not own anything in SD, we hold a loan on a portfolio of SFR's there that is not performing at the moment.

Do you have a significant other who could take out the loan?

Your answer needs to make sense, and be true.Also refi'ing your current primary into an investment loan also has the potential to be fraudulent if your family still occupies it as their primary. 

Are you looking for better loan terms from the lender?

typically no special license is needed when doing it for hard money loans that I am aware of. there may be states like california and nevada that are tricky where lenders need a license of some sort but for most part brokers i have seen are not licensed. 14 or 15 states require state license and NMLS registration.

So when the bank requires insurance for the loan amount.. that will work generally..