I'd like to pay off the mortgage and really enjoy the cashflow but would this trigger a spike in how the house is taxed?

I would create a separate LLC for all properties and try to make sure a bank has no trouble with you transferring ownership to a LLC and it will not trigger a due on sale clause.

I have a good amount for a down-payment, but do not know if I should postpone buying my first property or pull the trigger?

Do connect with local investors, or better take a trip and walk the city yourself, before  pulling the trigger, as a deal may look good on paper, but be horrible in reality, a somewhat likely scenario if the deal is hanging out for any amount of time on the MLS in this hot market. 

If you have good credit and consistent income with at least two years of history you can definitely pull the trigger!

Section 721 of the Internal Revenue code allows an investor to exchange property held for investment or business purposes for shares in a Real Estate Investment Trust (REIT) or an Operating Partnership without triggering a taxable event.Many investors are aware of a 1031 Exchange where an investor must find a replacement property to defer capital gains taxes on the property that was sold.

However, he would like to do "Body Work" or what I assume to be massage or some sort of physical therapy out of our house.

Both were key factors necessary for me to pull the trigger given the 15-hour time difference and working full-time.

There's a reason for that saying about keeping your powder dry; you have to have capital to pull the trigger.

If you like the layout of it already, then it sounds like you should pull the trigger and make an offer.