Foreclosure, short sale and auction vs. leveraged cash deals

[Thomas Dorwin]

I purchased my first three single family properties this year. All in the Midwest (MI). First was an REO, second was a short sale, third was an auction property.

The first was a 3 br/1 ba foreclosure for $50,000 and I sank another $7000 into a kitchen and bath remodel. It is worth about $65,000 based on comps.  

The second home was a 3 br/1ba ranch short sale that I got for $64,000 and sank an additional $5,000 for a new roof, carpet and garage door.  It is worth about $79,000 based on comps.  

The last house, also a 3 BR, 1 ba home, was bought at auction from the USDA for $27,700 dollars 2 weeks ago. I will have $35k into it, $3k for auction fees, about $3K in materials and labor for minor repairs and paint.  It is worth about $69,000 based on local comps.   

The first two properties were bought with 20% down and a local bank financing the balance. The third house I bought with cash. The first two properties rented quickly for $700 and $750 respectively. I figure the third one will touch about the same, $700 to 750. I have great credit, a good job and I keep enough cash in my account with that bank to support more than 6 months of mortgage payments at all times.  

I realize I get the benefit of leverage (and a tax deduction) on the first two financed properties, but I literally paid twice as much for them as the auction SFH purchase and they net the same cash flow as the auction house. So it seems like I may be better off paying cash in these kinds of deals and then using the newly acquired property as collateral to get cash for the next deal if I can.  Any thoughts on this approach?  

In other words, I would use the paid off home I bought at auction as collateral with a bank for a loan, then do a cash deal on the next SFH deal I find. It seems like I should be able to get 40 to 45,000 if the house I bought at auction for 27k if it appraises at $60,000+. With that 40+ another $10,000 or so of my own, I could theoretically pay cash for good deals as I find them in the $50-$60,000 range, then take out a collateralized loan on that new property and repeat. Is this possible or am I missing something? Do the loans count against me like the mortgages (where having more than 4 is a problem for some banks)?   

On finding good deals, I am thinking about keeping tabs on MLS properties that do not sell and circling back 6  months or so after the listing expires to see if I can strike a better deal. Anyone done that successfully?