You are obligated to provide the oldest verifiable operating statement (base year), which is adjusted into today's dollars (Using an LA City formula for inflation) and this is compared to your current year (yes with receipts, cancelled checks, bank statements, k1's etc), which can be significant. 

If you provide a scope of what you are demo-ing, you may have better luck with someone's experience to comment here, but costs can vary regionally, so a local contractor would give you the best actual estimate. 

They can provide you with some great insight about investing in that market.Staci

Time would be the biggest variable.Assuming the same repeatable services will have to be provided for STR & MTR, that are not provided for LTR, the costs may not be that different.Taking care of lawns, monitoring & paying utilities, taking calls, etc.Some services will be the same, but vary in frequency: cleanings, resupplying amenities, responding to inquiries, bookings, granting access, etc.

There was a lot of little tracts of west Texas desert land that used to be added to deed swaps to make the valuations work out back in the day.The reason for a 1031 in this situation is that it provides crystal clear direction and documentation. 

I would recommend obtaining a purchase/renovation loan, which would provide you with the funds to purchase the property and pay for the renovations.

Regards,Abhi.Abhi, There's no way for an investor to have an opinion on that without doing alot of due diligence (and way beyond the basic info you provided). 

Are there any banks/lenders which would provide some incentives on closing cost and give good interest rates?

My philosophy is very simple: never sell a property unless you can (a) put the money into something that provides a better return or (b) it moves you closer to your goal.3.

If the neighbor were to take a further action, then your title insurance may well provide coverage for you.