.- 1031 exchange opportunity: I could potentially do a 1031 exchange to acquire a duplex or triplex, deferring taxes.- Access to funds: I could consider a cash-out refinance or a HELOC to access funds for additional investments.- which property would you recommended me to keep? 

The property was rented and generated $160 cash flow after mortgage, taxes, insurance and property management fees were paid.

The reason being if you show them those reserves and the deal goes bad, they are gonna come after you for that $ and that will put you in a really bad position.

Then after the units are stabilized (perhaps with some seasoning), you could get a bank/HML to refi this up for 75%-80% of the ARV.  

However, these programs typically qualifies borrowers based on their income, such as tax returns.The DSCR would be a good option considering you and your husband are entrepreneurs and the tax returns don't look good on paper.

They remit the taxes.

The property tax savings are going to be in the ball park of 40-60%, but to be safe you should double your expected repairs budget when calculating the NOI.If you have any other questions, or want a more in-depth response, I would love to help!

Plus with no state income tax, cheap insurance, and very low property taxes, I’m probably starting $20k ahead of most people, and that’s a tax free $20k.).

After a year+ of unreliable management, I finally decided to switch to a new company.

And must be pretty significant unreported income if it would have caused $45k in state tax liability.You advised your client to wait past the expiration of state statute.