Should I Use Home Equity Loan for Initial Down Payment?

[Seth Sawyer]

Very basic question here. I'm looking to get started with a very cheap rental, maybe 60-70K purchase price. I can scrape together enough money for 25% down and a little reserves without taking on any additional loans, but it would dwindle our savings a bit. We refinanced our personal house to get out from under PMI around 6 months ago, but I didn't take any cash out at the time. We currently owe about 230K on a 330K value, so 100K in equity.

What are the pros/cons of taking a separate home equity loan for something like 40K and using those funds as the down payment on the rental property, just to keep some breathing room? 

Basically would you rather be a little thin on emergency fund and reserves, but not have any additional loan payment, or rather have the breathing room and additional purchase opportunities of the loan but with the $350ish extra payment a month?