I am not exactly sure what my goal is for the long run, but for the time being I'm looking to get a roommate, then after 2 years, to fully rent out my place and hopefully get some cash flow.

This demographic is projected to keep increasing over time, so I would do whatever you can to hold onto this property (ie cash flow well).Furnishing 700 sqft with PB or West Elm (you and my wife would get along great, Bonnie) won't be price-prohibitive and well worth the cost.

If you buy the existing furniture, it’ll save you time and let you start hosting sooner, especially if the permit comes through quickly.

Currently, I have limited capital, but I'm saving up.

A cash-out refinance can provide liquidity while keeping the property, though it carries risks.

Knowing exactly what’s happening with the duplex—rents, repairs, tenant feedback—can help you catch issues early and save time, stress, and money in the long run.

Eliminate debt, establish a budget, and save.

You mentioned W-2 income as part of a way to save on taxes. 

So if you do an exchange you are saving $100k in taxes today.

Are you cash flowing the property?