interest only loan v’s interest and principal loan

Interesting reading here, thanks everyone for their posts. I have an example here where I think it shows the advantage of an offset account:

Me: 100 000 cash, no properties owned
Buy first house as holiday house (say 200,000 to buy), put 20,000 deposit, 80,000 in interest only offset account

– – -2 years later- – –

Buy second house as residence, move 80,000 to my new mortgage (PPOR), and rent out holiday house as a full time rental (20,000 left on investment property).

In this example is an offset account with interest only the way to go?  Assuming I will buy an investment first and PPOR second, it seems this my best option.  Happy to hear some comments though.

Are there any drawbacks for this method?  Can the holiday house still purchased outright the same way or are there catches with the IO offset account?

Also, can the offset account be used to 'tune' the repayments to match rental income? 
ie – holiday house mode: low rental income/high deposit/low repayments
    – full time rental mode: high rental income/low deposit/high repayments

I assume that i could change from holiday mode to full time rental (or vice versa) at any time?  Would this be possible?

Any advice would be greatly welcomed