Mortgage plus Cash-Out for Down payment, or just pay cash?

[Carrie Smith]

Theoretical scenario: 

If I can get 180,000 out of my house for a cash-out refinance to purchase another property, should I pay cash in full for the 2nd property and have the cash-out refi on my primary residence? 

OR

Should I take out a mortgage on the investment property, and us cash-out refi on my primary residence to make the  down payment? 

Right now I'm thinking I should do the 2nd option.  My thinking is that in the worst case scenario, I would still have more equity left in my primary residence should I need it for an emergency situation beyond my normal emergency reserves, and it would be a safer option overall.  If I didn't use the 2nd option, I wouldn't have any equity to draw from my primary residence - but would I be able to draw the equity out of the investment property if I paid cash for it?

What are the pros and cons of each? Do I have to pay closing costs twice? I'm guessing the answer is yes, but hopefully it's in relation to the size of the loan in each case.

Experienced investors - what is your opinion?

C