@Angelica Rose - you can definitely break even or better househacking.

My friend said even if this person could be struggling and be late a couple of times a year or may not make 1 month rent once a year, since she is a long term tenant per her past and paid her rent without fail every month, and is motivated to make the new rental situation work for her financially, long term, if she stays 5 years, although occasionally could struggle a bit, I still will do better than most other tenant choices (frequent turn over, etc.)My rent is still covered by my past tenant at the moment even though the property is vacant as the Lease has stipulations for that the past tenant has honored faithfully.

Well I'd love to hear more about how you structure it then to remove the fees and make it better than merely investing in equities in a Roth or something like that.

Would I be better off keep the two businesses separate?

I'm looking for a better way to scale this though.

That gives the tenants a better ability to handle the increases and you will be less likely to have empty units, that you will probably need to fix up, costing you more, and have at least a month of vacancy, which cuts into your income.

Do I still have time to start an exchange with a qualified intermediary or am I better off just paying the taxes?

Duplex is better choice. 

You may see it on paper, but the reality is it's going vanish.If you're comfortable house hacking, probably a better choice.

To get better terms, can you draft off the underlying low rate mortgage with a wrap/sub2 offering?