Cash-out Refinance VS. Heloc

[Ricardo R.]

Hi everyone I had question or rather a strategy/scenario that I was hoping you all would be able to help me evaluate. 

Here's the scenario:     

Lets say.........

1.  I own a rental property free and clear and it appraises at 240K --- When there was  a loan on it for 120K, it still cash-flowed awesomely @ 420/mo.  but obviously  more now since there is no longer a mortgage.
2.  I have liquid investment cash reserves of 40K.

I would like to purchase 4 homes... of say 150K each and need to put a 20% down payment on each.. so a 30K down payment on each for a total of 120K total in down payments for all 4... closing costs are covered and will be coming from somewhere else. The cash-flow for each property would be @ $400/mo.

A) Would it be better to Cash-out refinance the 240K property and take out 120K for the down             payments? (essentially returning that property to a decent cash-flow of $420/mo)

OR...........

B) Would it be better to take out a HELOC on the same property for the same amount (120K) at 3.99% with $75 annual fee, which I would use for the down payments?

-My worry is that if I take out a HELOC it would cut my cash-flow for each home in roughly half and I be would stuck with that 1/2 cash-flow for up to 10 years with a HELOC which would equate to about $9,600/year in cash-flow for all four. Would it take me roughly a little over 4 years to pay off one HELOC down payment?

- If I were to Cash-out Refi., then they would cash-flow immediately at $400/mo. for a total of $19,200/year for all 4 properties combined. I would take 2 years to save for another down payment on a 5th home.

Any input would be appreciated. What are you thoughts? Is my math and vision here correct, in assuming cash-out refi might be the way to go? Open to all input guys. 

Alex