FIXED vs ADJUSTABLE mortgage for first property invesment.

[Sean Eads]

Guys, need some help evaluating my potential first property!

As of now, the owner has agreed to settle on a purchase price of 52K. Now, I am trying evaluate the best way to finance. I am talking to two separate banks and here is what they have offered:

OPTION 1: allowing a minimum of 15% down (because it's an "investment property") at 6.125% interest on a 30 year fixed mortgage. 

Total Cash Needed: 13,800 (including 4k in repair estimates)

Cash Flow: $245 at 

21% COC ROI

OPTION 2: allowing 10% down on a two year adjustable rate mortgage, 30 year term starting at 4.5% for those first two years subject to change:

  "Your interest rate can change every 2 years"

   "Your interest rate cannot inc or dec more than 8% over the term of the loan

   "Your rate cannot inc or dec more than 1.0% at each adjustment.

At 4.5% with 10% down:

Cash Flow =$291; COC ROI: 27%

At the potential 8% cap

Cash Flow = 188$

So my question is which option would you choose? Also, would it be feasible to go with the adjustable rate and then potentially REFI 3-5 years down the road pending interest rate hikes? Thanks for the advice!