pickle: low liquidity, but good equity, best way to fund rental purch?

[Bob C.]

I found this forum and have really been impressed with the varying opinions, and often thoughtful replies. So this is my problem...

I want to buy one or two rentals (depending on price). My situation is this:

- I own a rental home now free and clear that is worth $120k and throws 8K NOI.

- I own my primary residence free and clear and it is worth $200k. Only expenses are normal tax & util.

- due to retiring debts the last couple years I have almost no liquid cash. (5k if I'm lucky)

- I only have $650 in monthly debt obligations (cars)

So I am sitting on $320K in equity, and really want to leverage it. But what is the best way? I prefer fixed rate loans for budgetary reasons. Basically what is the best way to use this equity to finance one or two 100k properties? Are there tax implications (as in not being able to deduct loan interest against the rental)?

Somebody here must have been in this situation, or has known somebody with a similar issue.

I am open to all thoughts. I feel like a dunce because I have so little experience with mortgages / property loans. For that matter I am a greenie as far as rentals. I have awesome tenants so all I do is deposit a check and deliver a prime rib at Christmas. Thank you in advance.