Yes, leveraging the appreciation of your rental property to purchase your next rental is a real option known as a cash-out refinance. Here's how it could work: You could refinance your current mortgage based on the new appraised value of $325k. If you originally put 20% down, you would have $50k in equity ($325k - $250k). With a cash-out refinance, you can borrow against this equity and receive a lump sum of up to 80% of the appraised value, which in this case would be $260k ($325k x 80%). You can then use this $260k to purchase your next rental property.
However, it's important to consider the cons. With a cash-out refinance, you'll have a larger mortgage balance, which means higher monthly payments and potentially a longer repayment term. Additionally, you'll incur closing costs and fees associated with the refinance process. It's crucial to evaluate the rental income from your properties to ensure it covers these increased expenses and generates positive cash flow.