This is why you keep deferring through the 1031 and continue to make money off the deferred tax until you pass and your heirs get the step up in basis.

Two years ago, I bought a 4plex using an FHA loan and have and continue to occupy one of the four units.

I do have a question that probably requires a post itself - when does it make more sense to hold this property and let the renters pay off your mortgage while you continue to rake in cashflow and your property continues to appreciate, versus selling for a few $100K profit?

Underwriter will not check off on it income is travel nurse income. 13 week contracts, same company for last year and never any trouble getting continued employment.

FHA requirements for owner-occupancy state "At least one borrower must occupy the property within 60 days of signing the security instrument and intend to continue occupancy for at least one year".Not sure what your exit strategy is, but keep in mind you need to season the title 6 months before you can cash-out refinance into a conventional loan and use the higher ARV.

They wanted to move to the same town as my mom and my mom wants out of the house that needs lots of updating and continued maintenance.  

@Pandu Chimatait is unclear from your post if the total gain is 20K or if you and your partner each have 20K of gain.If we are talking about 40K of gain - you and your partner would be saving $12,000 of taxes(based on Dave's suggested federal and state tax rate).After an approximate $1,000 fee for the use of a 1031 intermediary - there is a potential of $11,000 of savings if you do a 1031.It is something you should consider if you plan to continue investing in real estate.

Or is it advisable to stick to the original plan and continue to save up money and analyze owner occupied units until the numbers match up?

(attached)NOW, here I am left with a house in disrepair, continuing to accumulate city violations (next inspection is due May 31st), renovation insurance, nuance fees for emergent boarding up the home and garage due to squatters.  

We have decided to sell a few of our rentals for the same reason only to continue to reinvest in more foreclosure opportunities.