It’s definitely smart to evaluate the tax and cost implications of your funding options.

I know that interest on the acquisition loan can be included in the cost basis since it’s inventory.

My husband (slash business partner/travel partner/coworker etc) prefers to avoid condos and townhomes due to the slower appreciation.

Even still, it could be said that I've still lost money due to my time on the tools instead of prospecting as a real estate agent (the cost of lost opportunity).If you can truly do 80%-90% of the work yourself (at acceptable quality levels) and you aren't sacrificing your time where you can get better returns for your efforts, then yes, it can work even up here in Canada.

But, these broad market studies are so large, they are almost meaningless, in the real world.Between glut of new supply in many "hot" markets coming online, a continually softening economic outlook, inflation over last couple years making day to day items feel cost prohibitive, many average renters are strapped and seeking lower cost housing.  

You magically get the seller to cover every single closing cost (A $12k gift, or a trick to get you to buy their problem.).

So I would caution everyone to make sure the replacement cost for your improvements will realistically cover your actual replacement cost in the event of a total loss.

Potential solutions include federally backed loans with lower rates or tax incentives to help offset the cost of a new mortgage, encouraging these homeowners to sell to new owner-occupants.

Make sure your rehab is "renter" cost rehab. etc. 

You should only be liable for tax on any appreciation since you inherited the rental (minus the cost of your improvements).