- Do I qualify for for a section 121 exclusion sense I lived on the property for the first 2 years of ownership?

Quote from @Ehrich Roberts: G’Day,Grateful for any advice in relation to mortgage options in British Columbia where liquid capital in combination with rental income would be accepted towards qualifying for a mortgage. 

I do not think options 1 and 2 are mutually exclusive, in fact I think you should do both. 

Many sellers will not accept this since they are in second position, and it is very risky since if you default (higher probability for investors with no money and/or no skin in the game), they will most likely be wiped out during a foreclosure.

I had 3.5% rate, did a lot remodeling and heavy lifting, and decided to sell due to the 2/5 capital gains exclusion.

Don’t accept any subject to offers since they will burn into your deal time.3.  

They will only accept if roof is torn off and redone.

If they're serious, I encourage them to send me the request which I accept (after I've also made our House Rules clear).

If you pay more, you won't meet your metrics and will probably have negative cashflow and/or equity.You may have to make 10, 20 or even 100 offers to get one accepted at the price that meets your numbers.This is what all investors did BEFORE the Great Real Estate Crash of 2008-2010.

These risks can happen to anybody no matter the type of investment they make like your investment house can blow up and insurance doesn't accept your claim, you could get hit by a bus, and boom no money, and so on.