I am under the assumption that only strict investment property qualifies for 1031.

You might know this already but there are some strict local rules about renting out rooms.

I read in multiple posts here that people were stating that a BPO is strictly addressing the current value of the property, versus potential future value after renovation.

It sounds like you were operating as strictly management of the property. 

@Josue Vargas, Actual rental income is not a strict requirement in order to be eligible for a 1031 exchange.  

They had strict rules against the condition of the property like not lending on mold.

I always try to meet with the city on anything that is not strictly permitted  by the zoning, to help understand the schedule and the requirements. 

You should do some serious learning on this because it's complicated and there are strict laws in Colorado governing the purchase of homes in foreclosure.Something to think about is that there are far more buyers in our market than sellers.

Do you know anything about the annual reporting requirements and if they are strictly enforced by CA?

I rarely splurged on any frivolous purchases, I never ate out or drink when my friends would invite me out, and made sure to have a strict budget where I eventually saved 50% of my income.