First Rental Property - Financing Strategy

[Ariel Nixon]

Hi All,
I'm in the works of my first SFR deal.. Its a 2bed/1bath home that I plan to add another bedroom to plus a little rehab. I've ran the numbers and they look good (conservatively around $280 monthly cash flow, cash on cash ROI of 13%) however due to the price of the home being lower ($38K plus about $15K remodel costs) i'm having a hard time getting a competitive rate.. Would love to get your thoughts on the following financing options or provide other suggestions..

Options I have received.. 5 year fixed rate (variable after) at an interest rate at 5.75% or 10 year loan at 6.5% interest rate, both have the option to include rehab costs in the loan at 80% of appraisal.. I also have the flexibility to pay for rehab outright if I so chose to do so. Planning to put 20-25% down. 

I wasn't expecting the variable rate, but heard this from two lenders. Is this common for investment properties?

As this deal is time sensitive, quick inputs are appreciated!