You are right to be thinking ahead, there are many factors to consider and making sure you are ready well before you choose to act is wise. 

Yes that's correct assuming you bought them at the right price where you were able to get all your cash back out.As far as the future goes you would have a mortgage on each house after you do the cash out refinance.It's crucial to make sure you know what that payment will be in advance to factor it in to your deal analysis.

Does the town have a septic design on file?

When making this decision you should factor in a whole lot of other things as well (income, retirement, safety money, etc.) so I am not going to give you advice on that without knowing your situation. 

Either you qualify or you don't; trust comes when the underwriter looks at your credit report and sees that you pay people back.Bottom line is if the numbers work with your taxes, a comp rental schedule while factoring in a vacancy loss, the income works.Stephanie 

It doesn't matter that the rents aren't showing up on you last tax return, they will just take your gross rents from your leases and subtract 25% as a vacancy / maintenance factor and then subtract the new mortgage PITI from the remaining number.

Then you need to put $200,000 of repairs, so subtract 200,000 from 420,000 and you get $220,000.This is the max amount you could offer on the property to get your cash back out, and you're not even factoring in closing costs and holding costs.

Madison, WI is one of those, and I am not sure exactly why, unless the presence of commune living and student housing is a major factor - lol.

 - The only factors that would really make a difference in both scenarios are: what is your rent?

If not, you'll need to factor in your PM costsHope this helps!