I am a looking a house that I want purchase as a buy and hold rental or possibly a fix and flip although my preference to hold it as a rental.  The situation is as follows:

Selling price $45,000-46,000 

Estimated repairs $5,000 (new flooring and minor bathroom improvements)

ARV: $68,000

Seller Owes $49,000

House will rent for $1,100-1,200 per month.  But I would need to put the $5,000 into the house before I could rent it. 

Seller is open and even suggested they would consider a lease/option or seller financing if I want to go that route.  I really don't want to pay the full $49K the seller owes and I think the seller is able to make up some of the difference between the selling price and the amount owed.  So I thought I should at least ask you guys if there was a creative way to finance this.   I have made all my purchases to date by cash or conventional financing.  So I don't the experience to know if a lease/option is a good idea or not.  Seller financing seems complicated in that the sale price would be less than what they owe so the seller would be on the hook for the difference at the end of the option and that seems risky to me even if I can figure a way to creatively tie that down in a contract.  

I would be interested in your creative ideas on how to finance and make this deal work.  

Thanks in advance for any suggestions on how to make to work as a win-win for the seller and I.