It is a common concern, I think if you are writing competitive offers then you can request a discount.

Some investors look for cash flow and some look for appreciation and there are investors who need to merge the two in order for the deal to be considered good.I think identifying what sort of investor you are looking to become should be answered first. 

I think he's right. 

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

. - In the event that you do get a deal, that you do not violate the intent or letter of an increasing number of anti-wholesaling laws, and that you actually receive an assignment fee, you will walk away thinking that your role is over.

I don't think this is the place to dive heavily into the pay cash or leverage debate as it's getting away from the poster's original question.

I think it’s just crazy set of circumstances, but the wholesaler seems new to this and that he has gotten himself in over his head.  

I think you may be over complicating it.  

I'm thinking 2 bed / 2 bath.

Does not affect your debt to income for future loans in the mortgage industry (auto loans could look different, but i would think similar so hopefully no worries there).