If I did this cash out refi, I would replenish/add to the emergency fund just for a little extra comfort but would like to use the rest to buy more real estate. $40k wouldn't buy much around me so likely I would have to look out of state which I have never done before.  

I feel more comfortable having the insurance. 

The cash-out refi process is more to my level of understanding so I'm comfortable with it but just worried it's a bad move considering what my scenario is?

If that pencils out as a profitable project, we will shoot for the moon and ask for relief on certain limitations in order to maximize the property.Hope that makes sensePaul

So you have to ask yourself, are those issues deal breakers or would you be comfortable continuing forward, knowing you will have to tackle them after closing?

It maximizes flexibility, gives access to equity and increases cashflow. 

Of course....but you still left money on the table.Ultimately it depends on you and your comfort level....

I knew that would likely never happen again, so I shut it down.I went back to my business in trucking and felt comfortable there.

That all sounds great so long as you're comfortable with all the new added risk and have enough of a safety net.

I've been remodeling for 20 years and know the codes well enough that I'd be comfortable doing it under the radar, but that's some major stuff.