This is probably 99.8% of all subject to deals.  

You’re probably thinking you have to offer asking price – not true!

Probably approaching $100k in total.My options seem to be sell and pay an additional ~70k out of pocket to the lender (underwater amount) or make the repairs and hope the problem is corrected once and for all.

Overall, it looks like a good deal, something you could probably even take to a local bank or credit union for financing.

The property probably won't cashflow for a few year (or until I rent the second unit longe term) but this isn't a huge worry for me as it helps me in other ways.

I would probably lean towards a home equity loan (not a heloc). 

But one of them getting a better paying job is probably your most reliable solution.

I  bought my first flip for $120k (in hindsight, I probably paid $15k too Much).

If you're not using Hard Money and the property won't qualify for conventional financing, then you'd probably need to locate private money or if you have friends with IRAs, they can be self-directed to invest in real estate.

I probably wrote north of $100m in loans similar to mortgages in addition to being an RE investor with several flips before starting out, so I knew the fundamentals, how to apply credit guidelines, structure files and analyze risk, the workflow, etc.