Assuming that the property would rise with typical inflation at 3%, your ROI with principal accrued, $0 cash flow, and 3% appreciation would be ~$8k a year (~12%).  

I didn't really think there would be any significant drawbacks to not having a basement, but since I'm new to investing I thought I'd ask the forum in case I was missing something obvious.

Prepay precludes you from paying more than 20% of the principal balance without penalty.  

Just as a caveat, the site has a lot of US based information, so take the principals, and education, but don't expect the specifics to work the same in Canada (ie. lists, foreclosure etc. )

The numbers are as follows:Principal:  $2,000,000Interest Rate:  4.25% for Principal and Interest payments4% for 1 year, 8% for 9 years for Interest OnlyLoan Term:  30 Years paid monthly.Interest Only total payments:  $1,520,000Principal and Interest payments:  $1,180,655.74Difference in payments:  $339,344.26Principal Paid in first 10 years:  $411,135.31So assuming the property was worth 2,500,000 at the end of 10 years, and assuming the cash on cash return was the same, the return at the end of year 10 would be:Interest Only:      $500,000  Principal and Interest:  $911,135.31 plus the difference in payments of $339,344.26 or $1,250,479.57.  

Each one has its benefits and each one will have drawbacks. 

your scenario is returning principal and interest.. that's why I think @Joan C. was thinking the APR was much higher than the coupon on the note.I grew up in the note business..

Similar to how a tenant/landlord setup would work with security deposit...You could open an escrow account with the association as the beneficiary, and the board members (or 1 or 2 designated members) act as the principal on the account able to transact with it. 

What do you think are some of the drawbacks of the license, just to put your original (and super helpful!)

I would do that and pay down the principal if you want it paid in 10 years.