Which "Level" of Rental Property Makes Sense For Me?

[Sean Confrey]

Hello BP, I am learning so much from everyone and I hope I can contribute to newbies like myself once I have some experience to share. 

I am currently a homeowner & have 100k equity built up with a remaining mortgage of $125k and 15-20k cash to invest with. I am looking into purchasing my first investment property - most likely SFH as I will be priced out of multi-family unless an incredible deal comes up.

Two options I am considering & would appreciate some input:

1. Cash out refi & buying a "lower level" property for cash, making minor improvements & renting out.

2. Cash out refi to finance down payment of "better" property (nicer house, better location, higher rent, etc..), make improvements as needed & obtaining 2nd mortgage on this investment property. **

**I shouldn't have an issue obtaining 2nd mortgage as I have excellent credit & decent debt-to-income ratio

Quality of tenants & appreciation is of utmost importance to me but cash flow is king right... 

Any feedback or suggestions on what a pro would do is much appreciated!!

Raleigh, NC is still experiencing a strong sellers market but should have some opportunities pop up as a result of the pandemic. 

Thank you!

Sean