Often, the party pushing for this will need to get friendly by offering to foot the bill (or supplement) for common area upgrades. 

From what I read box 3 links to Schedule C (Business income) instead of Schedule F (Supplemental income), if I group them together is it going to throw up a red flag for the IRS?

With this in mind I feel that wholesaling would be a good starting point for me as I have little cash and would need to supplement my current income quickly.

The idea of being able to leverage my money >6.5 times using a 15% downpayment to buy single-family properties sounds like an appealing method to grow long-term wealth and supplement to my MFR portfolio.Finding a 1% property seems difficult in the several markets I have recently been analyzing. 

There is also a gas wall heater that provides 50,000 BTU, but I thought it would be nice to have a wall heater in each bedroom for supplemental heat. 

Either draw it down from 45-60 at the 4% rule to supplement me stepping back from the workforce or have the ability to sell off, pay the taxes, and chase opportunity

Second, since your outflows are the same, ask yourself how many months/years you could make supplemental payments if your were short on a mortgage with the tax you'll defer in the 1031 exchange? 

I'd like to get into real estate small time REI to supplement my full time work. 

These should not be your primary funds for rental property emergencies, but they may be supplemental in extreme situations.I would say for one property, keep around $10,000 minimum in reserves.

My objective to to develop a portfolio of multi-family units that will supplement me in retirement (within 3 - 5 years) so Cash over Cash return is key for me.