Dispute about cash flow versus mortgage terms

Hi, 

We (husband and wife team) would like to get some perspective on when to to know how to assess long-term equity gain with immediate cash flow. We are going to rent our current home which has $90,000 left on the note at 3.25 percent and in ten years will be paid off. In order to buy the house we want (a foreclosure) and another REI I want to take out a home equity loan of $60,000 since our property is valued at $190,000. We would break even on rent at $1,700 a month and pay a little with expenditures but the property's mortgage loan would be completely paid off in ten years with just the remaining equity loan at $300. We would then be cash flowing $800 not accounting for the rent inflation. The hubs wants to do a cash out refi at 3.6% which would start the mortgage completely over but yield us $300 a month in cash flow when we rent. Is cash flow always King?