in my experience the longer you wait, the better terms you'll get - after 90 days more options, after 6 months more options, etc. 

I'm also considering other options such as using a fix-and-flip loan to fund the purchase and rehab, then repaying it using the cash out refinance.

I'm not familiar with the case, and don't have rentals there, but there is a bit of poetic justice here...not that I agree with the overall result, but far too often I interact those who simply institute 'clauses' in a contract (Lease, PSA, Options etc) which are grossly one sided or as it seems in this case unlawful.

I currently live with my wife and 3 children, so I'm not sure this would be a good option for me.

Your other option is to pay cash instead.

Are there any other options for us then to wait for a vacancy?

I’d be more concerned about your source of information!

This should eliminate the homeowner (1) selling a property while remaining liable for the note (subject to), (2) tying  up his property with a “buyer” who has no intent to close unless he finds someone to pay a higher price (wholesaler), (3) paying above market rental for an option to buy that can never be exercised (4) purchasing a property from a fix n flipper who did shoddy rehab, (5) purchasing a property with nebulous legal title, (6) contracting for home improvement with a fly by night contractor who then puts a mechanics lien on the property and (7) “listing” with a wholesaler disguised as a Realtor who doesn’t put the home on MLS. 

These are markets with somewhat to very affordable cash flow options that I have visted and loved and could see myself living for a temporary amount of time for a rehab/primary res, but don't have the minute data and information I am looking for.

PM me if you want to look at other options!