The taxable gain will be paid at the end of the 30 year deferral period, while the 1031 Exchange allows you to continually defer the tax and then the investor generally receives a full step-up in cost basis upon their death so that the taxable gain completely disappears.  

An alternative I've considered is renting while in CS and buying an area with a lower cost of living in another part of the country, which of course wouldn't allow the VA loan to be used.

There are deals out that make sense with 7%+, but not so much for a duplex.Refinancing a few years after purchasing can make your numbers look better if interest rates drop or your financial situation improves, allowing for a better rate. 

Here are some considerations for each option:Option 1: Using the HELOC for a down payment and renovation on a second property to rent:Pros:You can leverage your existing property to acquire another investment property without selling your current home.Rental properties can provide a steady income stream and potential long-term appreciation.You can use the HELOC funds for renovation, which can increase the property value and rental income.Cons:You'll have to manage the property yourself or hire a property manager, which can be time-consuming and add to your expenses.There is a risk of vacancies or unexpected maintenance costs, which could impact your cash flow.You'll have to pay back the HELOC, which will increase your monthly expenses.Option 2: Building a new house in a new community and selling it for a profit:Pros:You can potentially make a significant profit if the market is favorable and the property value increases during the construction period.Building a new house allows you to customize the property and potentially attract more buyers or higher rents.Cons:This strategy involves a higher level of risk, as you're betting on the market to appreciate in a relatively short period.There are many unknowns and potential delays in the construction process, which could impact your timeline and profitability.You'll need to have a good understanding of the local real estate market and construction costs to ensure that your project is profitable.Before choosing either of these strategies, consider the following:Research the local market conditions in Chandler, Arizona, to understand the current demand for rental properties and new construction homes.Consult with a real estate agent or investment advisor who has experience in the local market to get their insights on the best strategy for your situation.Evaluate your financial situation, including your income, expenses, and risk tolerance, to determine if either strategy aligns with your goals and financial capacity.Consider the tax implications of each option, as this can impact your overall profitability.Create a detailed financial plan for each option, including projected income, expenses, and potential risks, to help you make an informed decision.Ultimately, the best strategy for you will depend on your unique situation and goals.

I'd been worried I might be stuck with them, but Indiana allowed us to evict, and we had them out within 2-3 weeks. 

If a city wants to ensure landlords meet basic living conditions as a requirement for permitting that commerce, fine - but no tenant should *ever* be allowed to live somewhere without paying the rent.

However it can depend on a lot of things like your deductible, your credit, coverage.   

It seems then refinancing is allowed.

When you get to the point of renting out the unit make sure you get a NON refundable deposit if your state allows it to keep them honest.Good Investing...

This level of transparency will allow for very clear auditing by any member of the Investment LLC, as to what the construction owner is clearly profiting on the project aside from hard costs of the project.