Am I interpreting this situation correctly?   

@Leta Eydelberg, not to beat a dead horse here but like others have said it's also too late in the day to be asking for 1031 rules interpretations once you've chosen an intermediary and started a 1031. 

I'm sure the moderators have to make frequent judgment calls in interpreting the rules. 

On smaller loan amounts it's the points/fees that gets you (the 3% for owner occ and 5% for investment that you referenced), on larger loans it's the "average prime offer rate" (APOR) test, the computer is comparing the interest rate and APR on the cash out, 2-4 unit, high balance, high LTV, investment property (worst possible pricing, every individual item I just listed is a 'hit'), and wondering why it's X% higher than the owner occ 740 FICO 25% down $500k house (best possible pricing).Surprisingly, you see a LOT of variance in the interpretation of these rules, which translates into what is programmed into the various computer systems.

Would really appreciate some technical help with interpreting the OA language around distributions. 

If you need help interpreting their offer feel free to reach out.

Self-managing a handful of doors would not be a problem.  30+ doors that result in many hours per week of pushing paper around could be interpreted by the IRS differently.If you want to be 100% sure of no risk, hire a property manager.

@Robert C. you interpretation is correct.

Before, I'd argue about the semantics and interpretation of a guideline.

I know there's a lot of room for interpretation from bank to bank so perhaps our lender is interpreting it differently than others.