Also the property is held in my name and heard there are better tax benefits if it's in an LLC.

Although I've gained some knowledge through reading books and online research, my experience in this area is limited.

I owe $454k on the mortgage and after realtor fees/closing costs, i could net $200k with no capital gains tax. 

You can always reecaluate in 2-3 years before the capital gains issue kicks in, but all signs are that homes in Denver will be go up in value between now and when you really need to make a decision. 

My question is do I need to use all of the equity towards the down payment of the property, to avoid capital gains tax? 

Being a public adjuster will not really help you gain skills to work with upset tenants or the deal with the hassles of being a landlord.

He is aware his capital gains tax will be higher when he ends up fixing and selling the property in the future. 

Looking for some clarity on the capital gains.

There might be good reason for you to move these five properties into the LLC, but first understand why you will benefit from doing so.  

If I die, the property gets a stepped up basis and no taxes will ever be paid on the gains.