Using strategies like a 1031 exchange allows you to sell and reinvest in another property while deferring taxes, so I often factor this into decisions.For me, it's a combination of interest rates, appreciation, and potential cash flow.

Furnace was 30 years old and there were cracks in the heat exchanger.

Most people will tell you that your second choice can't be done, but the IRS has issued two (2) Private Letter Rulings on point where they did allow the taxpayer to build on property they already owned through a 1031 Exchange. 

Are you paying more in origination costs in exchange for not having a prepayment penalty?

Your acquisition fee can be "exchanged" for your equity contribution.  

This exclusion allows you to reinvest the proceeds from the sale of your primary residence without being immediately taxed on the capital gains.However, it seems like you might be considering a Section 1031 exchange based on how your question is phrased.

However, newer properties don’t always cash flow well, and you’re giving up significant equity in exchange for a home that might not provide you much financial gain immediately.

How does 1031 exchange works.

In a court situation, would email communication suffice for appropriate documentation for daily exchange?

In your case though, I've heard of people in Denver proper with duplexes who parter with LTR tenants (you could put them in the basement) who will co-host with you and be able to get a STR permit since it's their primary residence and you can work out a profit split for the STR or some kind of reduced rent for your LTR in exchange for helping you and you being able to keep the STR runningJust a creative idea I wanted to toss out as a potential plan B or plan C!