You got your principal back but you could have invested this 10k in stocks @ 6% making your investment worth ~16k in the same time frame. 

There used to be 100% loans on value add deals on the purchase price but that was years and years ago.I understand you are trying to pull out 100% but banks and the committees aren't going to make an exception for you and put their jobs on the line so you can get more money in your pocket.Sounds like if you did a 1031 exchange you would get max value minus the resale and purchase cost and put the money into another value add deal or deals to grow the equity again.No legal advice.

I want to be able to cover all of my bills from my sweet portfolio of stocks, bonds, and real estate.Why am I on this site in particular?  

Find a way to help them and solve their problem in exchange for equity, not tell them the obvious.

I manage a portfolio stock heavy and bond light so I was looking for a bond proxy.

I know we can defer capital gains tax if we do a 1031 but can we also defer or eliminate the depreciation recapture when doing a 1031 exchange? 

My thought was to offer my new unit in exchange for a unit that needs work and they would pay difference in cash.

The short answer to your questions are yes and yes.A properly structured 1031 exchange will let you exchange one rental property for several rental properties.  

I should know, as I rode some Worldcom stock all the way down to zero, back in the day.....  

The bacteria produces a gas that smells like S, & it can certainly damage the resin bed in an ion exchange unit or produce a black slime that builds up inside the unit.