I am using the tax benefit along with the principal pay down and appreciation to offset.

You'll want the rents to at least cover the monthly principal, interest, taxes and insurance (and HOA if there is one).

As for numbers, I currently owe $86,151 on the mortgage, and on Zillow it is listed at $143,600 but the numbers seem to be inflated on that site.  

Depending on the amount owed I might pay it off after I’m under contract to do a property inspection and ask for the money back at closing.

If a property goes into foreclosure on a second, as Ken said you will either be buying it subject to the first mortgage - meaning it's your mortgage now - or the first has to be satisfied to take possession of the property - or the owner of the first is going to be there bidding what they are owed, so you would need to outbid them to get the property and then you are the person paying off the first mortgage. 

And I’d owe capital gains tax on roughly $30,000?

The Chicago Association of Realtors'® specifically state "When you become a Dual Agent, you owe equal fiduciary duties at that point to both parties in the transaction, and you lose the ability to negotiate for, strategize and advise either one."

I'm not sure how they paid so that may or may not be a solution here...The other thing is technically your tenant owes you still, and the prior LL may be liable for fraud.

I still owe about $140k on the current condo.  

Happy to post more details on the financials but for starters we owe 1060000 on a 2.25% VA loan.