Spirelli

If you can get a mortgage at a reasonable rate then use it. It is all about tax. Mortgage interest is tax deductable. I assume you are not German so you will be taxed in Germany then taxed in your own country (after subtracting German tax paid). German interest can be offset in both countries. Which bank are you using? What are the conditions of the security deposit? Do you intend letting out both properties? Are they fairly priced (do you know local prices) and do you know the mietspiegel (official rent) for the property?

Seamus McConville