Request advice on duplex investment

[Paul Vanderburg]

I am analyzing whether it makes sense to purchase a duplex in Colorado. I currently own a condo worth $400k with a mortgage of $100k, so I have a LTV of 25%. I am considering a cash-out refinance to borrow an additional $200k for the down payment on a duplex. The lender I talked to is offering these terms:

Condo loan: amount = $300k @ 3.5% 30-year fixed (my LTV would become 75%).

Duplex loan: amount = $560k @ 4.375% 30-year fixed (my LTV would be 74%)

Combined PITI of both loans: $5000/mo

The combined rental income of the duplex is currently $3800. The estimated market rate is $4500. So at the current rents, I would need to pay $1200/mo for my condo, which is less than my current monthly payment. If I can get up to the market rate on the duplex, I would only have to pay $500/mo for my condo.

I have about $30k in cash for repairs and vacancy situations. So this is enough to cover a vacancy for 6 months. The rental market is currently strong and I don't think I would have more than 1 month vacancy at the moment, but you never know.

First time investor, hoping for some sound advice on whether this makes sense, or whether I'm over-leveraging myself. Thank you all.