Seller financing with a mortgage in place

[Jason Carter]

Question about this scenario: Seller has a duplex he wants to seller finance for around 200K. ARV 300K.

100% financing 4-5% he even floated interest only. But he owes 40K on his current mortgage. ($580 PITI with about 4 years left on it)

Duplex brings in $2400 total. 1200 a side. I want to keep it as a hold for myself. 

How do I structure this? Do I do a subject to on the 40K as a 1st and seller finance the remainder as a 2nd mortgage? 

Thanks in advance.