Your intent is to wholesale the property.

@John McCormick his $1.7mm property is a multi family which means much higher rents than a single family you're looking at.Houses in A+ neighborhoods, which that price indicates, aren't really viewed as properties that anyone on this forum would buy with the intent of renting out. 

Yes, investing in Castlegar intentionally since 2008.

But, you can do 1031 after a year too, but have to be ready to defend that this was true rental property and you intention was always a to rent. - If yes, then what happens if i live in the next property for over two years (i.e. will there be any tax implications from the first house)?

I had no intention of keeping this loan for more 1 year before I refinance to a better rate.

Our intention is to rehab it and rent it.We offered $160,000 with 20% down, the house appraised for $165,000.We own a similar size house in the area and rent it for $1800 a month and anticipate similar rentals on this one.I think much of the foundation issue can be resolved bye replacing the gutters and maintaining them keeping the water away from the foundation.I’m nervous about the deal and Wonder if anybody has any thoughts or feedback on it

Those things eat money like Cookie Monster eats cookies, and unfortunately most investors won't value those but about 60%-70% of cost if your intention is to resell. 

While it wasn't our initial intention, we realized that the 2700 SF home with a two bedroom basement was too much room for us right now and we decided that we would convert the basement into a rental of some sort (Vacation, Short Term, Long Term) until we grew into the space.We are able to secure a loan for 3% down and had the seller pay the private mortgage insurance up front, so we felt like it was a big win because we kept a lot of the capital that we had saved up for a down payment in our pocket.

As the property came with tenants in it, it was my intention to keep it as a rental income property.

A wholesaler is causing someone to enter into a contract that they have neither the intent nor the ability to perform to.