Cash out refi Decision points

[Travis C.]

Hello,

I read these forums from time to time and have found them to be very helpful. I wanted to pose the following scenario to see if anyone has any thoughts, as I am always interested in hearing multiple angles. My wife and I just finished paying off the mortgages on our 4 rental properties in San Antonio. Total equity is roughly $500k-$550k. We are ready for the next step in our investment path, but this is where I am stuck. I do consider my decision point to be a good problem to have, but just looking to bounce some things around.

Option #1: take out a 75% LTV cash out refi and take the money and buy 4 rental properties each. Then take the 4 new properties and do 4 more cash outs and keep repeating this until there is not enough money to buy any more while properties with borrowed cash from cash out refis.

Option#2: take out a 75% LTV cash out refi and take the money and buy as many properties as possible with 25% down. Would be about 10 properties with $40k down on $160k properties. I have a lender who will do as many loans as I need at 75% LTV. Each one would cash flow $350 month.

Essentially, there is little variance between monthly cash flow for option #1 and Option #2, but would it just be more advantageous to do option #2 due to leverage considerations because there would be more properties involved? I'm not doing any major rehabs. I can handle some rehab, but mostly only minor cosmetic versus some major overhaul although I only mention that as an aside, as it is not really important for my decision I don't think.

Please let me know what you think. If you want to throw out other options, then this is what I am here for, too. 

Many thanks!!!!