Don’t Buy a Florida Rental Unless the Math Works

by Tom McNamara

Don’t Buy a Florida Rental Unless the Math Works

People dream about Florida rentals. They see sunshine, sand, and rent checks paying for the view. They talk about passive income and freedom. But the math tells a harder story. For most buyers today, a Florida rental is a losing bet.

The Rent to Price Problem

The simplest measure is the rent to price ratio. A property should rent for one percent of its price each month. A $400,000 home should bring in $4,000 rent. That is the standard that keeps cash flow alive. Florida does not meet that test.

Most $400,000 homes rent for about $2,600 a month. That shortfall swallows your margin. And that is before the hidden costs come knocking.

The Weight of Insurance

Florida insurance is the most punishing in the country. Many homeowners pay five to seven thousand dollars a year. Coastal buyers pay more because they must add flood insurance. Half your rental income can vanish before you even think of repairs.

The Tax Reset

Florida gives homeowners protection. The homestead exemption cuts the tax bill. The Save Our Homes cap limits annual increases to three percent. Owners who bought years ago enjoy low tax bills.

An investor does not get that gift. The moment you buy, the county reassesses at your purchase price. If the seller was taxed on $240,000 and you paid $400,000, your tax bill jumps overnight. The extra three to five thousand a year can break the deal.

The Cost of Tenants and Maintenance

Passive income is a phrase that sounds easy. The reality is calls at midnight when the air conditioner quits in July. It is a roof that needs twenty thousand dollars in repairs. It is hiring a manager who takes ten percent of your gross rent.

Many owners say they are breaking even. They forget to count repairs, vacancy months, cleaning, and replacements. Breaking even is only a slow bleed.

When Rentals Can Work

There are rare times when rentals make sense.

Seller financing. A seller willing to act as the bank can set better terms than any lender today.
Hidden gems. A property poorly marketed or overlooked that sells under value.
Fixer uppers. A house with strong bones that needs cosmetic work. If done right, the improvement can force equity.
Motivated sellers. Divorce, relocation, or inheritance push owners to sell fast. Those cases allow negotiation that makes numbers line up.

A Lesson from Experience

I once bought rentals with seller financing. The terms looked good. One had a balloon payment after three years. The other had one after five. When the first balloon came due, rates were low. I refinanced and kept positive cash flow.

When the second balloon came due, rates had risen. Rents did not cover the new cost. Breaking even was the best case. Only equity saved me. I could sell and walk away with a gain. Without that exit, I would have lost money.

The Bottom Line

Most Florida rentals do not work today. The numbers are harsh. Insurance is high. Taxes reset against you. Tenants bring costs you do not expect.

Rentals can succeed only with discipline and strategy. They require patience, courage, and the will to walk away if the deal is not right.

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– Tom McNamara
Your FL Real Estate Insider

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