Then the lender will borrow you the $200k at a very high rate hoping you fail to make payments. 

Is the pre-payment penalty worth the lower rate you'd get.

Take into account variables like affordability, property taxes, rental regulations, and vacancy rates while doing in-depth market research to find viable investment areas.

My ask is if this is a good financing model then what exit strategies will I have with interest rates being what they currently are and no realization of what they will be in 5-10 years went the loan is due?

20% down fixed rate 30yr mortgage How did you add value to the deal?

I've seen many poor investments made with single digit cap rates and even negative cash flows in hopes of getting great appreciation. 

well at this rate they will get this stuff cleaned up.. now is the time to purchase one of those for a deep discount :).. 

His mortgage with a 7% interest rate came out to be $2,200.

I have a home I am wanting to sell that has a great interest rate with a conventional loan. 

@Jeremy BourgeoisYou couldAlso refinance it from another lenderDon’t assume they will extend it as they could sell the note - or they also could increase the interest rate to whatever they want as they have you by the you know whatI would look to partner with someone on developing it