and your cash flow is $300 +/- after all expenses, escrow $ for future maintenance and capX, and debt service, then I would say that is a great deal.Do you know how much or what was done for the rehab?

I think a credit history gives a much better picture of how well someone pays their bills and their current debt obligations.One of the problems with the current credit scoring system we use in the U.S. 

Should Person 1 be compensated extra for the additional risk of taking on debt?  

To buy another rental property, though, I would need to look out of the SF Bay Area, as the market is ridiculous.I have some questions on financing a second rental property, namely, do I need to be able to qualify to carry the debt of my current house and the rental, even if the projected rent of the new purchase can more than cover the monthly mortgage payments?

So that leaves you only $1000 a month for debt service.

We pay that debt down quickly because it is readily accessible for deals that come up and we really hate personal debt. 

I would be going from no properties in my asset column to two cashflowing properties to help me build capital, and payoff bad debt. 

Just shop around.That being said, they still base their ultimate decisions on your DTI (Debt to Income), so with the other loans in your name, you might not qualify.  

If the income covers expenses, debt service, etc. and still leaves a profit, and cash flow is your goal, that would be a fit in my book.If you're seeking equity, and have cash to put down on it, it could still work.Sorry to be non-committal, but these are questions you need to ask yourself: what are your goals for his property and does the overall situation meet those goals?

FMV: $215k, Outstanding Debt: $150k.