Which direction is the small multifamily market heading in?

No need to reinvest.  1031 exchange - Only for investment property -requirement to reinvest in new investment property -profit is tax deferred indefinitely.And if you're fortunate enough to meet both sections (property currently used for investment but you've lived in it for 2 out of the previous 5 years) you can take advantage of both!!!!!

If you have a loan that's not current and in good standing at present, any financing is probably off the table until you cure. 

Ive been struggling currently raising capital for a couple of funds....

Noone has a crystal ball but rates supposedly are coming down in 2025 that should be enough time for you to do whatever you have to do if your credit is below 750. 

My name is Elliot and I'm currently a NYC resident and i would like to ask for guidance on where to start investing in NYC i would like to invest in a multifamily unit here in NYC but the prices are a bit high.

There are other areas spread around like the garden district, Cloverdale and directly south (36111).

Using the current primary for a year is a conservative good idea. 

Bonus points if it also is great for maintenance requests and managing current tenant communications.

Since your lease clearly states a no smoking clause, it's important to address the issue directly with your tenant.