However, I'm worried that the rehab cost is too high and may affect resale value and property appreciation, since I plan to trade up in about 2 years (1031 exchange).

Please email me so we can connect and hopefully trade some clients.  

You could also credit or refund the over paid amount but I certainly would not accept a good month as a trade off for a bad month in the future.  

Not only can you come into contact with buyers but you may network with individuals in specified trades such as contractors, plumbers, electricians etc...

The lender requires a GC or sub-contractors licensed in the trades, the borrower cannot do the work themselves basically. 10% of the rehab budget is released at Closing to get a quick start, the rest released in Draws as rehab progresses. 6 months is time frame to complete.

I'm a pilot by trade, and deep down we all want our own plane. something in the $1.5-3m range will do nicely.

I'm confused.Do you run a marketing / modeling trade or business?

Ask for the debt to be settled for less than the full balance and request a "Pay for Delete" meaning they will accept "X" amount and delete any derogatory trade line so that it does not impact scores. 

I'm a psychologist by trade.  

As Kiyosaki says “The Rich don’t work for money” where you trade your time for dollars.