How to Run the Numbers on an Orlando Rental Before You Buy

A rental either makes money or it does not, and you can find out before you buy. It takes about twenty minutes and five numbers. Most people who lose money on a rental skipped this and bought on a feeling about the neighbourhood.

The five numbers

1. What it rents for. Not what the listing claims. What comparable units in that specific community are actually rented at today. If the seller says the rent is above what everything around it gets, ask why, and do not assume you will achieve it.

2. What you pay for it. Purchase price plus closing costs plus whatever it needs before a tenant can move in. That last part is the one people leave out.

3. What it costs to hold, every year. Property taxes, insurance, HOA or condo fees, management, and repairs. Get real quotes. Florida insurance has moved so much recently that a number from two years ago is fiction.

4. What the loan costs. Principal and interest at today's rate, on the amount you are actually borrowing.

5. What is left. Rent minus everything above. If that number is negative, the property costs you money every month. That can still be a reasonable decision, but it has to be a decision and not a surprise.

The three costs new investors forget

Vacancy. The property will be empty sometimes. Between tenants, during repairs. Assume it is not rented every single month of the year, because it will not be.

Capital items. Roofs, air conditioning, water heaters. They do not fail every year, but they fail. Setting aside a little each month is the difference between an expense and an emergency.

Turnover. Every time a tenant leaves there is cleaning, paint, small repairs, and time spent finding the next one. It costs more than people expect.

Leave these out and a deal that looks like it clears a few hundred dollars a month is actually breaking even.

The mistake that ruins good deals

Buying the projection instead of the property.

A seller shows you what the place could earn after improvements, at rents nobody in the building is currently paying. That is a plan, not income. Underwrite what it does today. If the plan works, you get the upside. If you paid for the plan up front, you have already spent it.

Small multifamily is a different exercise

Two to four units is still mostly a residential calculation, and you can often finance it like a home.

Five units and above is priced on what it earns, not on what similar buildings sold for. That changes everything. Ask for a rent roll and an operating statement, then check whether the expenses look plausible, because the ones on paper are often lower than the ones you will pay.

Have someone else check your maths

The most expensive mistakes are arithmetic, not judgement. A second set of eyes costs nothing and catches the missing line item.

Send us a deal and we will underwrite it and come back to you with what we think, including when we think you should walk away. Start on the invest page, or join the investor network to see deals before they go public.