Head spinning after home inspection

[Jessica G.]

Note: I'm very new at this. I've been renting out my former residence for three years, but this would be my first house purchase specifically as an investment.

I'm in the middle of acquiring a sub2 (taking over existing financing). The seller just wants out. The house is worth $130-$140K in a a tiny pocket of affordable houses in a very affluent suburb of Dallas with excellent schools. Houses in this neighborhood are ALL going under contract immediately with multiple offers right now (and in most good areas of DFW too). Loan is a FHA at 5% with $114,000 remaining. Rent comps are at least $1350. Seller doesn't want any money to change hands between us. I'm paying for the inspection and legal costs.

I just had the inspection done and my head is spinning and my husband is suddenly less on board than I thought he was. The owner has not done any maintenance (or cleaning) over the four years he has owned the home, so it's in "rough" shape. But I still think it's a good acquisition for us. However, we can only put a few thousand dollars into getting it into shape and holding costs for rental.

Inspector's observations

Roof over outdoor deck is not to code and is therefore "unsafe" per inspector.

Roofing is "amateurish" and has some buckled shingles (no leaks)

Missing flashing on roof & other areas

Missing sealing on windows and doors

Rafters separated from adjoining rafters; purlins undersized

Attic needs more ventilation

Toilets need replacing

House is filthy

Several smaller issues like water heater and washer/dryer not raised 18" off floor

The good news -- the foundation looks great. :)

Personal observations

Flooring needs replacing ($1,000 -- will use vinyl plank/carpet)

Walls need painting ($500)

Dead tree in front yard needs removing ($300)

Fence needs repair ($500)

Hole in drywall needs repair ($300)

My question -- do you see any dealbreakers here? I don't believe everything on the inspector's list needs to be fixed before I can start renting the house out -- am I wrong? Let me know if you need more information.

Edit: Also, there's this: "The grounding of the electrical service appears to be ineffective." What does that mean?