I also pay my mortgage for the house I live in.

Option 3: Pay large down-payment on modest rent ready house. 

After fully renovating both units, I refinanced to pay off the loan and held it as a long-term rental.

The interest rate isn't that huge of a difference between the 15 and 30 so worst case scenario if you have the 30 year option is you start paying it down on a 15 year timeline - sure you'll pay a little more in interest over the 15 years, but it will have been worth it if you bought another house.

Add that to about $25K tax for the depreciation recapture, that would be paying a total of $70K in tax if they do the 1031 exchange. 

Ask your employer if you can have your pay split up into three deposits, one to investments savings, one to your checking account for personal use on a daily basis, and one to an emergency account you can tap into so you don't have to tap into your investment savings.

I obviously want to pay the lowest taxes over time.

It looks good) I stumbled across someone locally who does it, but I'm sure you could find someone there if you or other out-of-town investors like the idea of paying a bit more for that level of security and obtain a remote monitoring source of the exterior of the properties.

I imagine this is a similar model to Redfin's associate agent program that pays by hour/tour.

You have to disclose all of this when you sell, so you will end up paying your plumber or discounting to your buyer.