I am kind of new to real estate investing as I got lucky the first two times but now I am looking to invest quite a bit more money and I am slightly terrified. 

I make a decent amount of money nearly from my W-2 (over 100k) but still not enough to easily buy another property this year especially if I have to put down 20%.

If the cash-out refinance option isn’t providing enough liquidity, you could also consider a hard money loan, though these tend to come with higher interest rates and shorter terms.

Hard Money loan How did you add value to the deal?

Getting into these properties as a non occupant coborrower (all the money invested to get in was mine) was a less cash heavy way to get into the properties versus as an investor.I already have great equity in these properties and prices continue to up.Sounds like, so far, the consensus is to sell the properties and roll the money into other non-condo units.

Or would the sale be considered to have already happened 3.5 years ago, the owner-financing be considered a loan, and only the interest on the loaned-out money be taxable?

and - if 35K is everything you've got - savings, emergency fund, money for real estate... that is not a huge cushion. 

There is a significant amount of time and money to spend to get the property ready and market it. 

This money is still owed by the tenants and at times we were able to collect some of the money for the damages.Regarding installing a sprinkler system, it's only helpful if the tenants don't turn it off.

Did you borrow money from a local bank/credit union for the remainder of the purchase price or did the funds from your 1031 cover all of it?