You might want to explore STR tax strategy if you are finding that the long-term rental tax strategy isn't working for your personal situation...

Was able to use our existing property as leverage on the new property thru the same bank.  

There's some complicated ways around it and things may have improved, but I can tell you that I was personally threatened with being charged with a felony in 2019 for renting my property even though I had gone through the proper permitting.

If they owed $200k they’d still have to personally buy at least $500k.

My thoughts: East Bay:- Close to a BART station to traveling medical worker/corporate person could hop on a bus/BART to work: El Cerrito, San Leandro, Hayward, Fremont, Walnut Creek, Pleasant Hill, Concord, Dublin, Pleasanton- Maybe Richmond, Antioch and Pittsburg but some parts have a lot of crime. - Going further out Brentwood and Oakley have appreciated quite a bit and have pretty good schools- Something with potential to add value: ADU attached to the main house or separately in the backyard in the future to get additional rent.

I use a broker, they do the leg work and since their interest is in my success, as opposed to an insurance sales person who's only interest is making commissions.

So to count on scoring one of those in the small window for a 1031 would be tough.Should I just keep the property, do light reno's and increase rent and bank cash flow? 

Your personal assets are protected with a viel, which can be pierced under certain circumstances.

(And best case it was a rental for 17 years then a primary for 3, making only 15% possibly eligible.)Personally, if you and he are both 100% sure of the facts I would first reach out to a qualified intermediary (a person who handles 1031’s).

The rationale being you are reducing your personal housing costs as the rented unit will be covering some of the costs.