Do you think I should Refi or Cash out Refi?

[CS McGintley]

I'm looking to buy my first rental property (on the other side of the country), and I'm trying to figure out the best way to finance it. I'm looking to buy in the 100k - 110k range and I currently have a 20% down payment saved for the property. My question comes to the Refi of my personal residence. Should I cash out refi or just a traditional refi? 

traditional Refi at 3.25% and lower my monthly mortgage payments by $200. Then take out a mortgage on the rental?

or

Cash out refi at 3.625% and increase my monthly mortgage payments $200. We'd get about 80k in cash out of the equity in the home and put that money towards the new rental.

Both of these rates are lower than we're paying now and refinancing will eliminate our PMI.

Here are my thoughts:

We were originally thinking about turning our current home into a rental, because we've done so much work on the property and really know the expenses of what it'll need in the future. But, if we take the cash out, this will raise our monthly mortgage costs to the level, where if we did rent it out, it wouldn't cash flow very well (especially if the rent rate drops in the future). If we went with the traditional refinancing route, this would lower our monthly expenses and it would cash flow better as a rental and build in a buffer if the rental rates drop in the future. 

However, with the cash out, we'd be able to buy the rental free and clear and the idea of owning a house outright would be an amazing way to start our real estate investing. 

What would you do in this situation? It's our first time, so I'm really just trying to get an outside viewpoint on the situation. Thanks!