Townhome Deal - First purchase, advice needed

[Conrad Johnson]

I've lurked here for a while, bought the books, and learned a ton of information. I have found my first lead, and while it may not work out, I'm trying to learn what I can from it.

Townhome
3 bed / 2.5 bath
Needs paint inside, carpets cleaned, but rest is ready to rent

Details:
It's worth about $160k per a realtor that looked at the property
Pulled comps from my realtor show $170k
Owed - $158,400
Payment - $1,138 includes taxes ($126), PMI, and insurance
HOA - $90.50
Estimated rent - $1300-$1600

Owner is very motivated and answered every question I tossed out. They would like to get what they owe, but are open to options. I've put it all in my calculators, but now am stuck / scared on next step. Looking for all advice on moving forward.

Subject to? Go through a short sale?