City of Fort Collins is a pain to deal with for building permits.

I can say that it was significantly painful for many. 

I am satisfied with the cash flow but managing remotely feels like a pain at the same time 1031 exchange doesn't seem feasible due to the limitation of time.Is selling and investing in RE mutual fund a better option?

You can save 300 or so a month for reserves and still cashflow 200+ a month.If you realize the management/process is too complicated or a pain, or no one wants to rent your specific home, you can always pivot and sell the home then. 

Obviously this will be a pain if you operate in multiple markets, but it is what it is.

Listen to their pain points and see if they'd be willing for you to help them out with those pain points. 

It was painful, scary, and stressful, but we got through it and came out better on the other end.Use this as motivation to save and buy that SFR (or maybe a duplex is a compromise) and keep this as a rental. 

Credit markets are tough right now.That rehab paragraph was a VERY tall order, which I think is why most folks are doing rehab loans with the hard money loan guys charging 13%+ and 3 points... 3 points and 13% is painful, but LESS painful than trying to check all those boxes laid out in the previous paragraph. 

Their pain point is that they need to be out of the place, quickly due to the health problem.

The difference is in the overall return vs the type/potential pain you are willing to deal with as you reach your investment goals.