Colateral as a down payment for another property

[Bayu Irjanto]

Hi All -- I will keep this short. I am in the middle of going into another deal and I was wondering if anyone can share their experience of using their paid rental as collateral for a down payment for a different house. 

I have a rented duplex free and clear and would need to use the equity on that property to purchase a commercial building (9unit). Talking to the lender, it seems like I have two options:

a) To cash out refi the duplex, and use the money as a downpayment for the commercial

b) To use the duplex as collateral for the commercial building -- Faster/simpler processing, potential savings for multiple closing costs, potential no money out of pocket (depending on the appraised value on the duplex)

If someone has used this method before, I'd like to hear why would someone use/don't use their free and clear property to pay for a downpayment for another property?

Thanks!