You can use a 1031 exchange to buy an investment property and later convert it into your primary residence, but there are a few rules to follow.Hold as Investment: Typically, you should rent it out for 1-2 years before moving in.

What is the Property tax diff between both these areas along with any hidden school taxes/Mello roos etc?

I did not raise the rent last year however we did think about putting the house on the market because there are not many houses on the market for sale and house prices in this area are significantly increased.

Are you in the early research phase, or have you already identified some promising areas?

If you want to keep them, make sure they are 100% honest about their intent, check zoning to verify they are allowed in that area, charge them market rate, and confirm they are insured to protect you and the property. 

If we buy NPN's in the area, it might make more sense to liquidate these at sales as opposed to taking them back as REO's.

They are generally small with limited floor and wall area.

My goal is to rent it out and then in 3-4 years allow my mother-in-law to move in as she is wanting to retire in the area.

They sent a very professional slide pitch deck that showed all of their justifications around that specific market, e.g. employment market, housing shortage data, the new developments in the area, the air bnb data, etc. etc.They also stated the numbers were conservative (7 year to reach the target returns) and that likely it will be year 4-5.

Jackson nailed the answer to your first question.A HELOC is a line of credit using real estate as collateral.A credit card is a line using your credit as collateral (nothing).A business line of credit uses your business as collateral.A "PAL" or pledged asset line is a line of credit that uses your investments as collateral.Etc.All of them share in common that they are a line of credit; you draw what you need and only pay interest on what you use.Traditionally, lines of credit that have collateral are going to have much lower interest rates than those that don't, like credit cards, because in the event of default there is nothing to seize.