I would apply the cash flow to pay down the debt and hope to have significant passive income (or equity to put into something else) in 10 years.

FHA is easier to qualify for and allows for higher debt to income.If you have not spoken to your lender already, you should also just look into the HomeStyle Renovation loan.

I would suggest taking the route of option 2 or 3, so not only are you saving over 10k in rent per year but the residents help in paying down the debt.

I like targeting outside of where I would live for SF and small MF (1-4 units) because of the lower entry price, usually higher cash flow since your rental income is higher relative to your debt service, and your appreciation potential is high if you can read the writing on the wall.

ARV - Profit - Repair Cost -Reserve Cost- Cost of Debt- Fees = "Strike Price"Thank you for the insight. 

I would use an experienced broker who can shop around and help you compare best terms on a National basis.

We raised $4.5 million in equity and got $4.5 million in fixed rate debt from Freddie Mac at a 5.85% rate.

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

So your debt is currently $3000 per month and your property earns you $1000 per month? 

It's very easy to make one tiny, minor assumption to fill in an unknown that completely changes the context and consequently the answer - I've caught myself doing this a few times.As far as the legal responsibility for the debt goes with Subject To, my guess would be that the contract basically provides a pathway for the seller to pursue the buyer for recourse related to losses they suffer from the default of the original loan, like a form of indemnification, but does not absolve the seller of responsibility for the debt.