I know I'm getting the tax benefits of depreciation, the minimal positive cashflow, and the appreciation on the property, but It's pretty much a long term play of slowly raising rents annually to increase cashflow, which will eventually get basically reset when my loan goes P+I in 10 years.

It can provide a very misleading valuation.Your appreciation numbers reflect just below 4% a year (I used 8 year hold) on both properties which is below national average for this period and below what neighborhoodscout depicts for Chicago 10 year average. https://www.neighborhoodscout.com/il/chicago/real-estateLooking at this from the outside, I am missing a lot of details such as your interest rate, is there a prop tax benefit for long holds (by the way look up prop 13 for CA at some point as it may play a role in your decision to purchase once you relocate to San Diego), the neighborhood, appreciation potential going forward, any emotional attachment, etc.  

The benefit is that you can take control of the rental while still allowing them to retrieve their belongings.

Of course, Cleveland is just one option, plenty of markets offer similar benefits, so it depends on what you’re looking for.Your hybrid plan is a smart approach though.

Real estate has so many tax benefits and credits available, that I always tell people it's crucial to have a CPA that's extremely knowledgeable in this area.

Would either of you be willing to explain cost segregation and benefits of using it as an agent?

I'm very new to investing and weighing which options would benefit me the most.Option 1:  Use the cash as down payment on another primary residence and rent out the current.

It will familiarize you with the basic terminology and benefits.

Yes, this is an unsexy option and it doesn't offer the same tax benefits, but you would benefit from reduced volatility (so long as you don't obsess over fluctuating stock prices), greater liquidity, stronger management teams and superior assets.

This is great news for real estate investors, as the TCJA introduced several tax benefits that directly supported the industry.