Need Advise on Subject-To Deal Structure (or any other ideas)

[Sean Williams]

I have seller with the following situation:

$240,000 single family house

$165,000 balance due on mortgage ($159k balance + $6k in past due pmts)

$950/month (PITI) is the current mortgage payment @ 3.875%

$1,400/month Market Rent

If the seller listed the property, they would walk away with roughly $60k after commissions. However, they are willing to sell fast at $220k and take payments on their equity. Any ideas for the best deal structure?

My thoughts were:
-Purchase at $220,000 with subject-to financing
-Pay the $6k to get mortgage current, then take over the existing mortgage/payments
-Give seller 2nd lien position and pay them $500/month (100% go to principle balance on 2nd lien)

This essentially becomes a break-even (or small loss) situation on monthly cash flow, but I own the property with $0 money down and get the benefits of depreciation. If interest rates goes down, I can either refinance to get seller whole or sell for a small profit.

Any other deal structure ideas?