BreakThru Realty

How to Analyze a Rental Property in South Florida

Reviewed by Tyson E. Sam, Founder and Broker of Record, BreakThru Realty, Florida License 3565210

The Short Answer

Start from the rent the property can actually achieve, taken from closed leases nearby, and subtract every cost of owning it: taxes at your purchase price, insurance, association dues, repairs, vacancy and management. What is left is the net operating income, and comparing it with the price and with your loan payments tells you whether the property carries itself. In South Florida the costs that sink a deal are usually insurance, reassessed taxes and association rules, so price those first.

Rent: Closed Leases, Not Asking Rents

An asking rent is a hope; a closed lease is a fact. Use what similar homes nearby actually leased for in the last several months, matched by bedrooms, size, condition and building, and note how long they took to lease. The South Florida Rent Index on this site shows median asking and leased rents for every city we cover, and a BreakThru agent can pull the closed leases around a specific address.

The Costs of Owning It

Property taxes at your purchase price, not the seller's bill; a landlord insurance quote for this property, with wind and flood where needed; association dues and any special assessment; repairs and replacements; a vacancy allowance for the weeks between tenants; leasing and management fees if you will not manage it yourself; and utilities or lawn and pool care the owner pays. Use quotes and documents rather than rules of thumb wherever you can get them.

The Three Measures

Net operating income is the year's rent minus operating costs, before any loan payment. The capitalization rate is that income divided by the price, and lets you compare properties regardless of financing. Cash-on-cash return is the cash left after the loan payment divided by the cash you put in. Lenders look at a fourth, the debt service coverage ratio: net operating income divided by the annual loan payments. Each is only as good as the rent and cost figures under it.

What South Florida Adds

Insurance can differ by thousands of dollars a year between two similar houses because of roof age, construction and flood zone. Taxes reset to market value after a sale. Condo buildings may limit or forbid leasing, and older ones may have structural assessments ahead. A deal that works on a spreadsheet built elsewhere often fails on one of these, so check them before the rest.

Why There Is No Citywide Yield Here

BreakThru Realty publishes sale and rent prices per square foot and the days homes take to sell and to lease for each city, but not a citywide yield, because one number would hide the insurance, tax and association costs that decide an individual property's return. The South Florida Investor Market Index explains the method. Nothing on this site is a projection or a promise of results.

Review a Property With a Broker

Every property is its own set of numbers. Send us the address or the strategy and a BreakThru broker will go through the rents, the costs and the rules that apply to it. Request an investor strategy call · South Florida Investor Market Index

How to Analyze a Rental Property in South Florida: Questions

How do I analyze a rental property in South Florida?
Start from the rent the property can actually achieve, taken from closed leases nearby, and subtract every cost of owning it: taxes at your purchase price, insurance, association dues, repairs, vacancy and management. What is left is the net operating income, and comparing it with the price and with your loan payments tells you whether the property carries itself. In South Florida the costs that sink a deal are usually insurance, reassessed taxes and association rules, so price those first.
What is a good cap rate in South Florida?
There is no single good number. Cap rates differ by property type, location, condition and risk, and a higher one usually reflects more risk or more work. Compare a property with recent sales of similar rentals nearby, and treat any figure as an estimate, not a promise.
Is a condo or a house the better rental?
A house usually gives you control over leasing and maintenance, with higher insurance and upkeep. A condo can cost less to buy and maintain, but the association controls leasing rules, dues and assessments. The answer depends on the specific building or street.
How much should I allow for vacancy and repairs?
Use the property's own history where the seller can document it, the age of the roof, the air conditioning and the appliances, and the time similar homes nearby took to lease. A lender's appraiser will apply their own allowance, which is a useful second opinion.

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