If your goal is to retire your wife and bring in $3200 in profit monthly I’d recommend selling it and using the proceeds to buy 2 or more properties using bank financing.

I would want to check his references and get a price concession to proceed.

The courts will look at how much you have to lose and $1000 is tiny, maybe not worth paying a lawyer.  

Another thing to consider would be a cash out refinance where you can keep the property, raise the rents closer to market and use the refi proceeds to buy another property.

There's enough from the proceeds in the 1031 to purchase 2 properties, but my wife is concerned that we're over-leveraging ourselves.So, I have 2 options.1 - purchase 1 additional rental property with all the proceeds from the 1031.2 - purchase 2 additional rental properties and split the proceeds from the 1031.I understand you may need more details, and depending on your questions, I'll be glad to answer. 

I contacted a lawyer, and we are proceeding on eviction of two counts: possession and non-payment.

Would it make sense to sell my home then use the proceeds to purchase investment property and house hack or keep my home then take out the equity to purchase an investment property?

Talk to the attorney that setup the LLC and get advice on how to proceed.

With no proof either way what are your odds of winning in court? 

It adds up and I do have pics in case the ex-tenant decides to go to court.