However you do have the opportunity to look at a 1031 exchange which would indefinitely defer all of the tax on that $240K gain.Selling one larger property to use the proceeds to purchase several smaller properties is a classic 1031 strategy called a diversification exchange. 

Additionally, the scalability of co-living models allows for diversification across markets, mitigating risks and promising sustainable growth. 

RE for me is diversification, increasing net worth through equity by buying at a discount, and a small monthly cash flow.

Cash flows are projected to be in the 4-6% range after stabilization but the bulk of the returns come on the back end with total IRR projected at 14-20% so I didn't think I'd be giving up solid returns to cut the tax burden.This option keeps me investing in RE with greater diversification through the funds and all of the other tax benefits of RE investing as they are structured as pass through entities. 

If you're well-prepared and have a solid plan in place, out-of-state investments can offer diversification and potentially better opportunities.

Monitor the market conditions and property values to seize opportunities if they arise.Diversification: While your goal is to pay off the property and use cash flow for the next investment, consider the benefits of diversification.

But, I get far more diversification from mutual funds than I would from owning a handful of MFs.But that seesaw (the leverage) can apply that leverage both ways and I don't want to get thrown off like I did when I was a child. 

Maybe diversification is key or is it the strategy?

The region has shown considerable growth and stability, making it an excellent choice for further investment diversification.

I think the responses that you will get will probably range from "scale faster and put down 20% on multiple properties" to something akin to a Dave-Ramsey-mindset.When it comes to investing, personally, the route that I see as potentially safer when it comes to cash-flow is the diversification of owning multiple properties.