What I mean is, it looks like as a married couple filing jointly we pay $0 in cap gains on first $94k, so could we use a strategy to pull out $94k in cap gains then 1031 the rest?

Budget extra for overages

Overall, I expected to pay no capital gains tax seeing as how we lived in the house 4 years out of the +5 years I owned it.

To us, it's worth the 8% of rents and the extra costs in repairs, and they still cash flow well even with the extra expense.

@Michell ChaseEvery state you own property in you need to register as you will eventually have to pay state taxes as well

I owe $345,000. after paying the mortgage and all utilities I would cash flow $500/month. 

I want to pay that debt off and  renovate the houses.

Pay Dirt Flips is her new business!

I also tack on a $50 pet cleaning fee because there will generally be some extra cleaning related to pets when they leave.

The state is Florida.I did not consider this first mortgage an issue because I was simply going to live rent and mortgage free in this property myself, rent bedrooms, make good money and recoup my investment in short time (netting 4k income per month if you count not having to pay my current rent).