This could be an option but based on where you are you might be better of looking near a national park and rental arbitrage is going to be less feasible in those areas (but still possible). 

Looking for exploring and purchasing subject to properties.

Although it seems like an option worth exploring, I don't see any deals that seem reasonable.

My question is, what are my options?

Full disclosure - I'm a mortgage broker in CA and do RM's, but the only way to see what their options are, is to get some information together.

You do have to think through your options, you said you wanted to take the 500k tax exemption by selling with the 5 year window.

This is what makes the new 5% down option so appealing for new investors/house hackers. 

Recognizing that I'll need to discuss options with an attorney, I'd like to have a few alternatives to bring up and talk through with them.

Tower FCU may be worth exploring and possibly Signature FCU.

I'd show that GC some renovation options for potential rehab strategies.