This implies renting is initially cheaper than buying and at high LTV, rentals are initially cash flow negative.  

No, I highly doubt it.

The bank they are using with that offer is now saying my site prep bid came in way too high and not approving me (so far. still in process).

This property has some one-of-a-kind qualities namely a nice creek with inbound and outbound waterfalls at each end of the property (its on a hill w creek canyon).I've gotten the septic scoped and certified, well is good, power needs to be reinstalled as property was abandoned years ago.

You are a high w2 earner, The house is worth 110k today, you are buying from your grandma for 60k in exchange for free rent for life, upside ARV of 200k.The costs of owning the house will help provide tax relief on your high w2 earnings, you are buying a great chunk of equity that will pay off in the future, and you and your grandma are doing each other solids. 

I've been a real estate investor my entire life, doing my first deal as a senior in high school ($5,000 mobile home).

If you offer more $ for the property than the all cash offers AND you appear to the seller to be highly qualified in the method you are using for sourcing the payment, at some point your offer will be more appealing than the all cash offers.I don't understand why you would consider a 1031 for another property in two years. 

However, if you're a W2 high income earner or business owner, I can't imagine it makes any sense to flip houses, mail mass post cards, wholesale, or build lead gen websites with the value of your time being better spent other places (such as learning about real estate and increasing your income through proven means), such as at your 9-5pm or growing your business, and your real estate is a long term process and you don't need "home run" deals to qualify or make it work.

Or for the high-end primary homeowner has no legal way to 1031 exchange; so the deferred sales trust is a no brainer.

We decided the cost was too high and it was not worth it from a financial or risk perspective.