Tax basis is $215K, we will buy it for $200K with 10% downpayment and 90% seller finance (30 year amortization) with a balloon payment option within 5 years.

Armando - A few questions I would ask are:- I've seen banks typically use 5% for vacancy factor- Are you self-managing?

There are so many options for great investments in both of the areas I serve ( Gatlinburg and also Blue Ridge GA) I love being able to get a report from the property manager on every turn to know if there were issues or positives about the previous stay.

For investment properties you should be using private/hard money lenders, but if it's a primary or you have a long window of time to secure the financing then traditional may be the way.Overall, it should be easier to get approved via creative financing though as there are options and workarounds for nearly every scenario (they just may cost more the more creative you need to get).

Any other better cheaper options available?

My current options include: Patio pavers (rubber and stone/brick)GravelCement padNothing/stick with grassThis is currently for my residence thats a house hack but I have a rental that the shed part of this applies as well.

That depends on the loan agreement you have with them, some require it, some will not allow it and others it is silent which typically means no restrictions.  

The City of San Jose has on their website that new addresses are required but separate meters are optional (link below).https://snapadu.com/blog/electric-panels-upgrades-power-sources-adu/https://cao-94612.s3.amazonaws.com/documents/City-of-Oakland.PGE-Joint-Information-Bulletin-METERS-FINAL.pdfhttps://www.sanjoseca.gov/business/development-services-permit-center/accessory-dwelling-units-adus/adu-faqs

Definitely agree, if you can qualify for a second home then it will almost always be a better option. 

It matches the typical demographics who rent MTRs: individuals or couples for 1 bedrooms, families for 3-4 bedroom homes.