Florida 2-10 Unit DSCR Loans

2-4 units versus 5-10 units

A duplex, triplex or fourplex is treated as residential property by most DSCR programs. The appraiser provides a rent schedule for each unit, the lender totals the rent and compares it with the full payment, and the process looks a lot like a single-family file.

Five-to-ten unit buildings sit in a middle ground. Some programs treat them as small commercial property, review a rent roll and operating statement, and look at net operating income as well as the ratio. Fewer programs serve this size, which makes shopping across wholesale lenders more valuable.

Florida factors for small apartment buildings

• Roof and building systems. Florida insurers focus on roof age, electrical, plumbing and wind mitigation. An older roof can make a building hard to insure, which can stop the loan.
• Flood zone. Check the parcel; many older multifamily neighborhoods sit near rivers, bays or canals.
• Code and permits. Unpermitted unit additions are a common problem in older buildings and can reduce the unit count the appraiser recognizes.
• Taxes. Small residential properties of nine or fewer units fall under Florida’s non-homestead assessment cap after the first year; the reset after purchase still applies.

Coverage math for a fourplex

Take a Jacksonville fourplex with units leased at $1,150, $1,150, $1,200 and $1,250, for $4,750 a month in total rent. If taxes are $6,600 a year ($550 a month), insurance is $9,600 a year ($800 a month), and principal and interest from your own quote is $2,400, the full payment is $3,750, and the DSCR is $4,750 divided by $3,750, or about 1.27. A vacancy in one unit would not change the lender’s calculation, which uses scheduled or market rent, but it would change your cash flow, so keep reserves.

Try your own building in the DSCR calculator by entering total monthly rent and total expenses.