Congrats - are you putting zero debt on the property? 

My client is looking for one to consolidate some current debt and to finance solar.

The didn't live within their means, accrued a lot of debt, and it eventually resulted in them not paying rent and being evicted.Consolidating debt reduces their payments so they have more money available, but it doesn't automatically teach them to live within their means.

Your 3% rate likely helps you with cheap debt and without the need to chase high that normal rental rates.

If I finance the rebuild then the 1031 exchange presents some challenges (I will need to land a property that cash flows or breakeven so that I can get the loan for my rebuild, or banks will count that debt against me).

Wanted to both reduce our debt load and also take profits off the table. 

I used a LOC to build a 12 site RV park in a small town, opened it up and 1.5 mnths later, I'm full occupancy and servicing the debt (some of it at 8.75%) & cash flowing.

If you find some good deals you could use debt to acquire more doors to get you to your cash flow number faster (your option 2).

Since I’ve been syndicating real estate debt and a few equity deals for 25 years, I’ve made it my business to maintain a constant “overview” of the “product” being offered.  

You can refinance it into a conventional loan and that helps avoid the higher down payment.FHA also offers more wiggle room when it comes to DTI debt to income ratios and reserves requirements.