Help! Need Advice.

[Eric Johnson]

A friend bought an investment property in 2006 for 123K; she owes 118K; house currently valued at ~50K; the bank has approved a short sale of 45K. She had an investor willing to purchase but the deal fell through. The house has some major issues - one being mold - because the former tenant trashed it before being evicted.

This, seemingly, is not a house a rehabber would want since the cost of repairs would far exceed the value of the house. This could be a good rental investment, however.

Any advice on this? Does anyone see any potential here? I'm a very new investor so any insight would be greatly appreciated.