Asset-Level Risk.

When the seller wants to see proof of funds, or a pre approval letter to go along with our sales contract (which is a must have in any deal I've ever been involved in) how am I to obtain this if I don't actually have the funds on hand to see the sale through? 

This gives me asset protection and anonymity. 

This will help with travel time as well as obtaining supplies from a local supplier.

I feel like I am buying a safe investment but not achieving a high yielding asset.

With that being said, we would love to pay off debt and lower our payments so my husband can leave his other job but on the other hand, i'm wondering if it would be a better option to obtain a cash out loan for an investment property.

It's not that easy to accomplish and usually involves advanced strategies such as bonus depreciation mentioned by @Logan Allec and asset segregation.The good part is that investor-friendly lenders will add back depreciation, not counting it against your income for underwriting purposes.

But we somehow managed to buy a thrashed duplex that was near the worse in the area but had good cash flow and appreciated (as did most of our other depreciated assets). 

Iam closing my first deal on a four unit multi-family in Schenectady New York, just looking for some advice on obtaining tenants, how far to go on a rehab, and really any information and advice from people that are doing it.

I would say leverage your assets.