One thing I would mention that you could do in the future is sell a portion of the property in exchange for the rehab.

You may find the odd hobby landlord that is willing to exchange rent for some extra peace of mind if he thinks you are just that amazing of a tenant.

Would I be able to protect that amount using the 1031 Exchange and not worry about the other amount since it's not affected by capital gains?

This will likely be my wife's preferred option (low risk, instant returns, increases available credit, lowers our DTI, etc.)2) Put the proceeds of both properties into 1031 exchanges and trade up. 

Ideally I want to 1031 exchange it. 

Or is it always better to 1031 exchange the property and just deal with whatever happens in the market? 

An important fact, that many don't know, is that being a 1031 exchange intermediary is not a regulated business.

Good morning BP,We are in getting the ball rolling on our first 1031 exchange, and super excited about it.

If you do a good job, they might let you do some of the leg work on a deal in exchange for a cut of the equity.

We can do a 1031 exchange and purchase a duplex that way, but it means selling a unique, easy-to-rent property.