The Bayport Dr deal intrigued us due to its market-ready condition, favorable purchase price, and high potential for profit with minimal effort.

Mostly people with minimal RE experience are adding a single ADU and they often make that choice based on cash flow without taking into account the negative equity position.  

I want to minimize my taxable income for the year.

Minimizing CostsHolding a real estate license comes with ongoing costs, such as licensing fees, MLS access, and association memberships.

A primary residence will most often provide more favorable loan terms so if you are willing to wait one year while you living in your new property and are comfortable with renting out your primary residence to a tenant, then getting something such as an FHA loan is a good strategy to minimize your upfront costs and hopefully get better loan terms.

Zillow seems to do minimal verification of information provided and that just isn't good enough.Your situation does seem strange though. 

Just my opinion but I think 2 years is too soon to consider exiting deals (minimal appreciation and less than optimal use of depreciation). 

With minimal equity it doesn't make sense, your rate seems good too compared to current ones

At best, wholesaling may require that you obtain a minimal understanding and experience in these three “foundations”.Look, I wish you luck in your endeavor, and I sincerely hope you end up in the 1% that find wholesaling  to be a profitable business.  

Repairing to sell might recoup some costs, but given the market and your limited funds, selling “as-is” is likely the best option to minimize further losses.