So, including points and interest, at 5 months, you'd repay $87,200 if I did that right: $80,000 principal plus 4 points = $3,200 plus 5 months interest at 1% per month = $4,000, total $87,200.

If you go to the court house and look at the actual foreclosure court file, it will show the amount of Principal (only) being foreclosed on.  

You were missing Principal and Interest from your mortgage and also Management expenses.Based off of that I put your numbers into it.Rental Income             $2375ExpensesManagement               $190 (8%)Insurance                     $125Capital Expenditures   $71.25 (3%)Taxes                           $325Repairs                        $237.50 (10%)Interest                         $412.50 ($110k @ 4.5%/30 yr)Principal                       $144.85 ($110k @ 4.5%/30 yr)Vacancy                       $118.75 (5%)Electricity                     $250Water ad Serwer          $50Total                             $1924.85Cashflow                      $450.15Looks like pretty good cash flow from that.

In that scenario, it might be common to owe over 1/2 of the original amount because payments are applied first to interest and then principal.

However, you have to be careful of the senior lien holder asking for unpaid principle+interest+penalty fees; sometimes this can be far higher than the face value of the outstanding principal balance.

If you buy right, you can still cash flow even after paying two loans for the down payment and principal of the house.  

@Amber TurnerThen you have the choice of going Freddie, or Fannie, whichever is more advantageous, if needed.Reminder that retirement accounts can be used for reserves, at 60% of value.Below is particular to your situation as you described it...Fannie:4% of unpaid principal balance for non-subject property investment properties.6 months of PITI for subject property. 

If you are already approved, then just take out the 50K and put 5K back on the principal leaving you with the 45K that you needed.

I currently rent my place in California (so I don't own a principal/primary residence currently) and can't move as I have kids in school here, etc.

I like to make mine on an amortization schedule like a mortgage so that i am paying it down the same way, PITI (principal interest tax and Insurance).