Cash out refinance primary residence to buy another

[Vanja Dimitrijevic]

Hello, I've been researching BP podcast and resources and am looking into buying another property to downsize from the current one but wanted to use the equity in my current house to purchase a new house in the area. Here are the specifics: our current property is worth 360k roughly; we owe 120K on it. Our current lender is offering us 170K cash out refi ( I will be researching this in a greater detail ). We would like to use this to cash out the new property. We are looking into getting a fixer upper and plan to rent out our original residence ( Zillow says we can get $2700 median rent in our area ) while moving and fixing up the new house. Our long term plan is to ease into real estate investing or being a small landlord with minimal headaches or complications. We will both keep our W2 employment for the near future just looking into getting an extra income or make our retirement easier. So, if anyone can guide me in the right direction, I would like to know:

1. Is getting a cash out refinance a better way to do it instead of getting a HELOC? If so, where would I find good resources to get the best terms and do you think that going with our current lender would give us best terms and be less complicated paperwork? I am still unclear about everything I read on the tax benefits for getting the cash out refi, and would like to understand that better

2. In this situation, is it better to get a property through regular means, look what is on the market (through realestate agent), or maybe go through a sheriff sale? We are somewhat handy and would not mind fixing up the house while living in it. 

3. What should I pay attention to if i was to get a property in this situation through an auction?

4. Is it better to get an LLC when I become a land lord to get some tax benefits?

If it makes any difference and will better guide your answers, we live in Ohio.

Thank you for any insight you can provide me. Best regards, Vanja Dimitrijevic.