Is a Cash Out Refi on this property a good idea?

[Tandi H.]

We are looking at doing a cash out refi, wondering what you think.

Currently we have a 30 yr fixed at 3.25% and we are 5 years into it, $75k left on mortgage.  Property will appraise around $200k.  So this would give us a good lump sum to reinvest into another property or other investment.  This property has been our home but we are moving and will turn this into a rental which will gross around $1200/mo.

We are being offered a 30 yr fixed at 3.75% with 1.676% points, I'll attach a screen shot of the details. This would bring our monthly payment to about $800 PITI. (Current PITI payment is at $720).

I think we would cashflow about $250-275 a month after payments.  This seems like a no brainer to me, pull out at least $130k, after paying current mortgage and closing costs ($80k) have $50K left to play with.  

It brings up the old debate about how much to pay down mortgages and how much to free up for leverage...I don't know that there's one answer to that question....but I'd be interested to see other's take.  How much equity do you like to keep in your properties?

If it matters we also bought two other properties this year so we're up to three.  Others are right around same interest rate and 10-25% down.