I am currently in a situation which I need advice on, and would appreciate any and all feedback available.

I live and work in Tokyo, Japan, and was recently approved for a yen mortgage through a bank in Hong Kong for the purchase of a property valued at up to $850,000, with a loan to value ratio of 70%. This means I am required to come up with 30%, or $255,000 as a down payment. This amount is not the problem, as a relative has agreed to invest $240,000 in the deal for a guaranteed 5% return per year. My problem is, I do not know what property I should invest the money in, because I live in Tokyo. I am from Hawaii, so the only area I am actively searching is in the Honolulu metropolitan area, because I have some good leads there on properties with guaranteed positive cash flows. However, I would like to know people's thoughts on this type of investment. The details of the mortgage are as follows:

Mortgage type- the rate I will be borrowing at is 1.5% above the cost of funds rate (currently 0.8%) of the lending bank. This means I am paying less than 2.5% per year to borrow the money, which is an amazing deal, I think. Also, this mortgage is interest only for THE ENTIRE LIFE OF THE LOAN, a full 30 years interest only. This means I will never pay down any principal, and never build up any more equity than the down payment, which I borrowed from relatives and will be paying down eventually.

I have never seen this type of mortgage before, for such a low rate, and it is only available to me and my wife because we are earning salaries in yen, so I want to take advantage of it before the offer expires next month. So, my top choice for an investment property is as follows:

Brand new condo in downtown Honolulu, listed at $872,000, can purchase with a $70,000 credit at closing. Unit has been rented out by the developer for $3300/mo. until August 2009. Average rentals for this highly desirable building are $3500/mo. for similar units on lower floors.

My payments will be as follows:

Interest-only payment of $1100/month on $561,000 mortgage.
$700/mo. maintenance fees on property
$1000/mo. interest payment to relatives for their investment in the property.
Closing costs of approximately $10,000

The developer is paying the attorney's fees of $10k, which incidentally is going to a good friend of mine, who is also friends with the developer.

So, given the above information, the property will be paying for itself, and could even be throwing a little positive cashflow my way.

Does anyone have any opinions/comments about this situation? I am open to alternative ideas as well.

My other idea was to purchase a piece of property that my wife's grandmother owns, and have the grandmother build a house on the property which is going to come back to my wife eventually in the form of an inheritance. A 3200 square foot home in that area would cost roughly $600,000 to build, according to a friend who is in the middle of building a house on his family's property nearby. My wife's grandmother's property is 7500 square feet, and the tax assessed value is $839,000. The downside of this of course is that there would be no cashflow at all while the house is being built, and no guaranteed renters, as with the condo.

Please advise!!

Thank you very much for your comments in advance...