This means that if when you sell this you do so to buy a bigger/better rental.....we can still fully defer all taxes.

C-class properties in B/C neighborhoods Light rehab (no full guts or extensive deferred maintenance) Reasonable price.

Below are the criteria I’m looking for in the property: 5+ UnitsPurchase Price between $800K and $3M.C-class properties in B/C neighborhoodsLight rehab (no full guts or extensive deferred maintenance)Reasonable price.

It seems to me you would have your best chance with a non owner occupied owner with a lot of equity who can do a 1031 exchange and defer taxes while getting more cash flow.

These are tax-deferred accounts.

If you would defer a large amount of taxes then it stillmay make sense for your situation,  but either way do make sure to consider all aspects.  

Any immediate Rehab needed or is it all deferred?  

Can he put the rental home in an LLC then do a 1031 exchange and rent the home for himself while deferring the tax consequences?  

The vacancy rate says "deferred maintenance", and you said the deposit will stretch you thin.   

Approaching OwnersI'll explain to Owners the benefits including the passive income at 10x+ interest rate they'd get from putting money in the bank, benefits of deferring taxes, and benefits of holding assets as security.