The rates may be fixed for that long, but the 10% loan is likely an interest only where the principal isn't repaid. IF you are ok with that, go ahead, just make the realization that these two packages are not an apples-to-apples comparison.

good luck!

ps – the game for rental properties is almost always cash flow

EDIT – If you can find a lender willing to do the 90/10 and let you avoid PMI, then it seems like that is your best bet. Cash flow is king.

In other words, you find one of the houses on the site below for sale for 50% of the value, lets say the property is worth $100,000 ARV (after repair value). So it is for sale for $50,000 and there are $10,000 worth of repairs (you will also have to find a cheap wholesale contractor that is use to working with investment properties, another google search or ask an investor in the area). You bring the estimated ARV to the hard money lender and show them how they will make their money plus interest on their investment. $50,000 purchase price + $10,000 repairs = $60,000 cost of the house. That is a $40,000 sales profit.

If you want to rent it out, then you show that too instead of the sales profit. If you get $1,000/month in rent – $100 property management fee = $900 left – $300 your fee = $600 payment back to the investor over 10 years and he has just made all of his money back plus $12,000. That is only a 5% return, but these prices are rediculously high. You will likely want to buy a house for WAY less and fix it up. The deals are out there. You might want to rehab (flip) a house a couple of times to get quick cash. The reason the hard money lenders will want to give you the money if because of the return on investment and because if you don't pay them, they get the house and get their money back that way.

The only 100% financing is VA or USDA, but if your credit is suspect, you aren't getting that.

An excepton to this is if you buy a VA or Bank foreclosed house. The VA offers "Vendor Financing" for investors at 6.5% for as little as 5% down, although there are limited numbers of these properties. Banks selling foreclosed homes also are often willing to provide good financing deals if you are an investor with good credit and some cash.

One thing to advise, with today's mortgage situation it is very important that you make sure the financial structure of any deal is smart. On poster mentioned the old addage that "borrow as much as you can" and in normal times that is good advice. However I lived through boom and bust, in particular I lived through the S&L meltdown of 1980. When you have a situation where property values are DECREASING, as they are in many areas of the country, maxing out mortgages becomes a dangerous strategy.

The idea of maxing out mortgages works, because even if you end up in a financial pinch you can always refinance or sell your property for more than you bought it for. However, for the next few years, if you are able to get a 90%down loan your property may not be worth that next year and you will be stuck on the fast road to foreclosure and bankruptcy.

Don't get me wrong, buying investment real estate is a great move right now, the best investment you could possibly make. But the market has changed drastically and people who don't adjust to the realities will lose money. Now is a time to buy properties cheap, with conservative loans and rental situations where you get good monthly income and wait it out for 2-5 years when the market recovers. Then you can either sell for enormous profits or refinance to pull tax free money out of your property and keep on renting it.

I'm also working with partners to purchase properties that are light fixer-uppers cheap, do the repairs, refinance to get our investment out, then rent it out. Before we would have flipped it, but the financing and the buyers are not out there to make it worthwhile. If nothing else, all those people being foreclosed on need some place to live.

You will make an imense amount of profit, but it will take more time for the profits to show themselves.

Hope this helps, and I'd love to hear how you do

Also, you will be in debt forever. $500 a month for the rest of your life is…

In investment property you should strive for cash flow and equity, all of which is achieved greatest when your property is paid for.

If you are able to save the amounts you mention then you should set up a separate savings account and deposit money into that account.

At the end of the term of the fixed loan you will be able to then renegotiate another interest only fixed term loan for a reduced amount ( depending upon how much you have saved in that special account).

The reason for taking an interest only loan on the rental property is that all the money paid out in interest is an allowable deduction against the income earned on the property. Quite often the rental property can be operating at a loss ( ie negatively geared). The loss is used to offset income earned by the owner from their employment. This helps to reduce their income tax liabilities. If you are earning income that attracts say 40c in the dollar income tax on your top dollars, for every dollar of loss from your negatively geared investment property, you will reduce your income tax payable by 40c.
You should discuss this with your accountant or financial advisor or educate your self on the taxation implications.