I'd need to know more information to determine myself if I were assisting you (hypothetically, of course, since we aren't allowed to advertise our services through this medium), but from the surface level it does sound like you do qualify for the 121 exclusion.

My cousin is selling his 5-unit townhome complex about 2.5 miles from the beach.

Paying down debt will help your DTI ratio, really important with your income level. 

I was recently notified by my tenants that they have bedbugs in their unit and they've obtained 3 bids from exterminators for removal.

This implies our unit’s cash flow is below if it were an LTR because 1) we pay utilities 2) we furnish the unit 3) we pay MTR  PM fees which is near double the LTR rate. 

Investment Info:Small multi-family (2-4 units) buy & hold investment.

Thanks lol, the dude literally fled the United States after the real estate fraud he was involved in was exposed.Anyone thinking about investing with him at this point deserves to be stolen from.

The listing MUST be on the local MLS.There are hundreds of MLSs in the United States.

@Dave FosterCan one unit be used as primary residence right after the ADU is completed?

With second home loans, the mortgage must be for one unit (I do a lot of 2-4 unit STRs), the property must not be rented for more than 180 days out of the year (limits revenue), must function reasonably as a second home (usually limits out of state investing), rental income will not qualify as stable monthly income (projected AirDNA does not play into your DTI).