With a contractor on board I’m hoping that will alleviate the most difficult part of the equation.

Debt is not an indicator of what your tax liability would be.And yes, the way to alleviate that is to add a number to the BRRRR strategy - 1031. 

That would alleviate much of your fears I’m sure.

Any other thoughts or strategies to try and facilitate a deal and alleviate some tax burden?

Having  multiple exit strategies (use/rent/flip) can help alleviate some risk, but you ALWAYS make your money when you buy.

I don't know the situation that occurred in the OP but if you can alleviate at least one of the above and one of these parties knows what they are doing you will be ok.

Your freezing problem maybe alleviated a little with Pex as it is less prone to split when it freezes but you need to insulate the area prone to freezing.

I would really like to alleviate this burden for this family, hold their hand through the process and solidify my first wholesale deal.

I noticed they paid $385K for it in 2012, estimated their mortgage payment, and made an offer that would put money in the pocket plus alleviate #10-12K of mortgage payments during THEIR slow season.

There are also numerous transportation construction projects planned and under construction linking Nashville to Clarksville to alleviate traffic as Clarksville is one of the fastest growing cities in the country.