Proc. 2008-16, the IRS will not challenge that a property qualifies for Section 1031 gain deferral if—1. the relinquished property has been held for at least 24 months immediately preceding the exchange and in each of the two 12-month periods immediately preceding the exchange,a. the taxpayer rents the residence to another person at fair market value for at least 14 days, andb. the taxpayer does not use the property more than the greater of 14 days or 10% of the total number of days the property was used; and2. the replacement property is held for at least 24 months immediately after the exchange and in each of the two 12-month periods immediately following the exchange,a. the taxpayer rents the residence to another person at fair market value for at least 14 days, andb. the taxpayer does not use the property more than the greater of 14 days or 10% of the total number of days the property was used 

Or is there anything you would suggest to change about the approach I outlined in my original post, rather than replacing it entirely with one of these other approaches?

In Class C areas we offer a 90-Day Tenant Replacement Guarantee - not to be confused with a Rent Guarantee - where we will not charge an additional Placement Fee if a tenant doesn't pay their 1st 3 months of rent and we have to evict them. 

Use average price per square foot for the area, cost to build new/replacement cost, raw land costs. 4.

The taxpaying entity that is invested in Real Property has to both sell the relinquished property, then buy the replacement while following all other 1031 exchange rules for the exchange to be deemed viable. 

Replacement costShort term rentals are part real estate investing part business, so it is a hybrid model.

I figured since I need to replace the roof, rafters, flooring and subfloor, I might as well raise it up and turn it into a 4 plex.

Purchase price: $332,000 Cash invested: $67,000 Sale price: $445,000 Purchased this great 9 bed 4 family at a discount. 3/4 units were rented so we increased the rents on them and replaced the timber supports on basement with concrete filled steel supports.

Everything will need to be replaced.

Stop paying rent and face an eviction.Possibly find a replacement renter acceptable to management.Good Luck.