How much do they want you to to pay, to pay off one of the mortgages (or both of their existing mortgages)? 

If you have a lender they should be getting lien releases as they pay draws.

Is it better to sell, pay off mortgage and capital gains and take the cash to invest in another property or is it better to refi/ETO and take the cash to invest in another property?

@Eric SmithGenerally, if the taxpayer sells the relinquished property to an unrelated party, the taxpayer generally cannot acquire replacement property from a related party unless:The related party is also participating in a 1031 exchange.The related party pays more in tax on the sale to the taxpayer than the taxpayer is deferring in the exchange (this scenario is rare).Let’s look who is considered a related party: Spouse, children, grandchildren, parents, and siblings.Corporations and shareholders owning more than 50%.Commonly controlled corporations.Partnerships and partners with more than 50% interest.Trustees, grantors, and trust beneficiaries.Non-Related Parties:In-laws.Aunts, uncles, nephews, nieces.Friends.Domestic partners.Entities owned 50% or less by the taxpayer or a related party.In your case, your mother-in-law, aunts, and cousins are not considered related parties to you under the definitions in Sections 267(b) and 1031(f).

The last one told me I'd likely pay a small fortune for this policy. 

Never pay an upfront fee.You didn’t mention your state but understand that with little exception, an NMLS registration is only required for consumer-purpose loans.

I will have to have money lined up somehow to pay him.

This means that you will probably need to pay registration and filing fees in at least 2 states if you don’t buy CA property as a CA resident.Any lawsuits should be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced, some debate as to SMLLC).

Don’t want to pay taxes on the capital gain.

However, if you bought it and managed it as a market rate apartment, your experience would be very different.My point is, I can control how fast a unit turns simply by adjusting my asking rents.