There may be some legal and title complexities that arise if there is an open escrow and they sell the property to someone else after you.Personally, when faced with a similar situation regarding the release of an EMD I made it clear I would not budge, even if it meant the money sat in an escrow account for years... they eventually conceded.   

What I am trying to avoid: renting for 2 years to eventually end up getting a condo/duplex later on or the flip side investing so much into a condo/duplex, and just overall not having it make sense with this situation.

But the house is only 10 years old, it's huge, it's in a decent area that's still being developed (Eastern East SF Bay Area), and it has the potential to earn us some money.Does the earning potential of the house make up for the headaches of renting in CA and having to pay a boatload of taxes on the equity when we eventually do sell?

Will they eventually pass legislation to include it, who knows. 

There's a couple of things that make this more attractive than the other option sugggested of forming a new LLC to own the property.First is the expense and reporting involved in another LLC entity.Second though and more important in my book is that by having your LLC own a TIC interest and having your partners LLC own a TIC interest you keep the utmost flexibility available to you as you move forward with that property to eventual sale and possible 1031 exchange.  

But at this point do not want to get too much ahead of myself.So, basically, keeping my current situation in mind, how to form an LLC, any specific type (cost effectively) and move my property into that LLC and eventually all my finances too.

People will always tell you their method is better, but eventually it comes down to you to make the decision.

However, my wife was not with me at the time so in respect he had to end the conversation, because I'm sure it was eventually going to lead to making a decision on whatever they were trying to market.

I'm looking to get into wholesale but also eventually fix and flip.

Keep it, benefit from appreciation and eventually use it for a HELOC for future investments2.