I think I have got enough knowledge and capital to buy my first SFH or duplex rental property, but my wife thinks buying rental properties is gambling.

With this type of sale, you still get to defer capital gains taxes for 30 years, and you don't have to exchange your property with anything. 

The rental property with the capital gains was purchased 11 years ago using a 1031 exchange.

Now your LTV is 66.67%.You could, in theory, refinance this property (without putting any additional capital down) to get back to the 80% LTV. 80% of $120k is $96k.

Furthermore, you will need a job (or another stabilized source of permanent income) to help you build up your investment capital.

Now, I can defer paying capital gains taxes for 30 years, and I can do whatever I want with that money. 

What you paid is what you declare.The finesse comes in those Expense vs Capitalize repair issues. 

After we repair and update all the units I believe we can get a gross rent of $5550/ month (but that is going to take a year or two to gain capital to rehab each unit.)All these tenants have been in these units for years, some as long as 30 years.

Matt - thanks for the post I would recommend getting an owner occupied purchase loan for the new property you plan to buy ...this will allow you to get best rates available I would also recommend doing a  " cash out " refinance on the  free and clear rental  in order to obtain  a larger amount of  cash / working capital  for your  projected  plans  ......ideally a heloc  program would be best to set up but most lenders / banks wont  allow a heloc on a rental  property so you would likely need to  use a straight 30 yr fixed loan ..adjust the loan amt  so that the  cash flow you end up with is acceptable for you

Focus completely on RE investing, weather that’s physical properties, notes, lending of capital.