Save for down payment or payoff debt before investing

[Holden Smith]

I am 25 and my wife is 27. We take home about $4,500 a month. We have a mortgage on our home that we bought just 2 years ago (no equity) and have about $80,000 in student loan debt at about 5%. I am looking for advise about how we should plan to get into REI. Should I plan to stock up our cash or paydown debts to give us a better cash flow from our jobs to buy our first rental. We are targeting single family rental homes. Here are our debt payments per month:

Student loan @ 5% (23 years left) ($370)

Car 1 @ 3.6% (2.4 years left) ($260) about a $7,500 balance left.

Car 2 @ 0% (4 months left) ($240)

Current mortgage @ 2.625% (28 years left) ($970)

Roth contribution +$850

We currently have $10,000 in our Roths. We want to get started after I finish my MBA (my employer is paying for it) in the Spring of 2016. We plan to buy a house that is about $100,000 and maybe make $150ish a month cash flow. We will need about $25,000 to get started. I've done a lot of research about my market and feel comfortable jumping in, but am trying to decide the best path to get started. My plan is to pay off Car 1 to free up cashflow so that we will have less payments to worry about when we buy our rental house. If I do this I'll be able to "snow ball" and save more money. However, cash is king and my gut is telling me to save the money and just keep making the car payments. What would you do if you were in my situation? My wife and I are conservative people who grew up with parents living pay check to pay check. We would really like to avoid that.