How to structure this deal

[Matt S]

have an opportunity on a 3/2.5 condo in a solid growing area. It is currently rented and owner wants out of it due to hassle with tenant. It's worth $130k and current notes are $125k. 1st loan is an ARM loan at $100k. 2nd loan is a balloon with 25k principal. Total payments are $1100 and rents in area are $1000 to $1200. Condo fees are $75/ mth.

The owner wants out of this badly and selling it outright has not been an option due to the market the past few years. Now as market has improved the seller is willing to break even or take a small loss to get out of it.  Tenant hasn't paid rent or pays only a portion of total rent.  

The positive are the seller is motivated.  And this is a developing area with big upside.  I'm just unsure how to structure this or even if it's worth it.  Had thought about assuming the 1st loan but unsure what to do with 2nd.  

Any ideas?  Walk away?