How To Underwrite a Fort Lauderdale Duplex

Thinking about buying a duplex in Fort Lauderdale but unsure how to run the numbers? You’re not alone. Between insurance volatility, flood risk, and shifting rents, underwriting in Broward can feel complex. In this guide, you’ll get a clear, step-by-step process to build a defendable pro forma, the local inputs that matter, and a compact example you can model. Let’s dive in.

Start with the right local data

Rents and vacancy

Begin with actual lease comps for similar 1 to 3 bedroom units near your property. Prioritize recently rented listings and verified leases over asking rents. Cross-check with multiple sources to confirm ranges and trends. For vacancy, use a conservative allowance. A long-term duplex in Fort Lauderdale often underwrites at 5 to 10 percent, with older or tougher properties at the higher end.

Sales comps and cap rates

Pull recent 2 to 4 unit sales in the immediate area and compare price per unit, price per square foot, and in-place income to derive an implied cap rate. For sensitivity testing, know that small multifamily cap rates in Broward commonly land from low to mid single digits into the low double digits depending on condition and submarket. Always anchor your cap rate assumptions to current local comps.

Neighborhood drivers

Proximity to beaches, Port Everglades, I‑95 access, employers, universities, and everyday amenities can influence rent levels and turnover. Evaluate your duplex against nearby rental options on a per-unit and per-bedroom basis. When in doubt, keep rent assumptions conservative and test both current in-place rent and market rent scenarios.

Build your duplex pro forma

Follow this workflow and document every assumption.

1) Gross Potential Rent

• Sum both units’ market rents over 12 months. If units are occupied, show current rent and a market rent scenario for renewal.
• Do not include short-term rental income unless you have confirmed it is permitted and licensed for the property’s zoning.

2) Other income

• Modest items like parking, laundry, storage, pet rent, or utility billbacks can help, but estimate conservatively for a 2-unit.

3) Vacancy and credit loss

• Apply a vacancy allowance of 5 to 10 percent of GPR. Add a small bad debt buffer if tenant risk is higher.

4) Effective Gross Income

• EGI = GPR + Other Income − Vacancy and Credit Loss.

5) Operating expenses

Include these annual line items and keep CapEx separate from routine repairs:

• Property taxes based on assessed value and millage.
• Property insurance including wind and hurricane coverage. Add flood insurance if required or prudent.
• Owner-paid utilities such as water, sewer, trash, or electric if applicable.
• Repairs and maintenance. A practical baseline for small duplexes is about 1,200 to 2,400 dollars per unit per year, depending on age and condition.
• Capital expenditures or reserves for big-ticket items, sized separately from routine repairs.
• Landscaping, pest control, HOA fees if any.
• Property management if outsourced, often 6 to 8 percent of EGI for small multifamily. If self-managing, account for your time.
• Legal, accounting, advertising, licensing, and permitting.

6) Net Operating Income

• NOI = EGI − Operating Expenses. Exclude debt service and income taxes from NOI.

7) Financing and debt service

• Inputs: loan amount, interest rate, term or amortization, and lender points or fees.
• Owner-occupant buyers of a 2-unit can explore programs like FHA for lower down payment, subject to occupancy and rental income rules.
• Investor loans often require 20 to 30 percent down and may underwrite rent conservatively.

8) Key ratios and metrics

• Cap Rate = NOI divided by Purchase Price.
• DSCR = NOI divided by Annual Debt Service. Many lenders target 1.20 to 1.35 or higher.
• Cash-on-Cash Return = (NOI − Debt Service) divided by Equity Invested.
• Break-Even Ratio = (Operating Expenses + Debt Service) divided by Gross Potential Income. Many investors aim for 85 to 90 percent or lower depending on risk tolerance.
• LTV = Loan Amount divided by Purchase Price.

9) Sensitivity analysis

• Model upside and downside: rents plus or minus 5 percent, vacancy up 2 percent, insurance and taxes up 10 to 20 percent.
• Add near-term capital needs for value-add work and code compliance.

Broward costs and risks to price in

Insurance and hurricanes

Broward is coastal and exposed to windstorms. Expect higher and sometimes volatile insurance premiums. Many policies include hurricane deductibles set as a percentage of dwelling coverage, commonly 2 to 5 percent or more. If the property is in a Special Flood Hazard Area, lenders typically require flood insurance. Consider a hurricane or major-event reserve in your budget.

Property taxes and assessments

Estimate taxes using assessed value and millage, and confirm any special assessments on the tax bill. Investor purchases do not qualify for homestead exemptions. Underwrite a realistic year-one property tax based on your projected purchase price and local guidance.

Short-term rentals and local rules

Fort Lauderdale enforces short-term rental permitting and zoning. Many neighborhoods restrict or ban vacation rentals. Underwrite as a long-term rental unless you have confirmed STR legality and licensing for the specific property.

Sea level rise and resilience

Fort Lauderdale has areas that experience tidal flooding and storm surge risk. Evaluate elevation, drainage, and flood mitigation. Plan for the potential of rising insurance costs and future flood-hardening expenses in longer hold periods.

Building codes and mitigation

Wind mitigation upgrades such as impact windows or roof tie-downs may be required after major rehab and can help you secure better insurance rates. Include these capital items in your CapEx plan if they are not already present.

Tenant demand factors

Rent levels can be influenced by access to beaches, employment centers, transit, and universities. Seasonal patterns may exist, but for long-term leases, build your underwriting on annual averages, not seasonal spikes.

Practical template you can reuse

Use this compact checklist to structure your underwriting.

• Inputs and assumptions

  • Purchase price; units: 2; unit mix and size
  • Monthly market rent for each unit
  • Other income per month
  • Vacancy percentage
  • Management fee percentage of EGI
  • Annual property tax, property insurance, flood insurance if applicable
  • Owner-paid utilities, landscaping, pest control, HOA
  • Repairs and maintenance, CapEx reserve, miscellaneous operating
  • Loan amount, interest rate, amortization years, points

• Calculations

  1. GPR = sum of monthly rents times 12
  2. Other Income annually
  3. Vacancy = GPR times vacancy percentage
  4. EGI = GPR + Other Income − Vacancy
  5. Operating Expenses = sum of all expense items
  6. NOI = EGI − Operating Expenses
  7. Annual Debt Service = annual principal and interest
  8. Cash Flow Before Tax = NOI − Debt Service
  9. DSCR = NOI divided by Debt Service
  10. Cap Rate = NOI divided by Purchase Price
  11. Cash-on-Cash = Cash Flow Before Tax divided by Equity
  12. Break-Even Ratio = (Operating Expenses + Debt Service) divided by GPR

Worked example

Below is a simple example to show the math. Replace every figure with verified local inputs.

• Assumptions

  • Purchase price: 500,000 dollars
  • Unit A rent: 2,200 dollars per month; Unit B rent: 1,800 dollars per month
  • Other income: 50 dollars per month
  • Vacancy: 7 percent
  • Management: 7 percent of EGI
  • Property tax: 5,500 dollars per year
  • Property insurance: 3,600 dollars per year
  • Flood insurance: 1,800 dollars per year if applicable
  • Utilities: 1,200 dollars per year
  • Repairs and maintenance: 3,600 dollars per year
  • CapEx reserve: 3,600 dollars per year
  • HOA: none
  • Loan: 75 percent LTV, 375,000 dollars at 6.5 percent, 30-year amortization

• Calculations

  1. GPR = (2,200 + 1,800) times 12 = 48,000 dollars
  2. Other Income = 50 times 12 = 600 dollars
  3. Vacancy = 48,000 times 7 percent = 3,360 dollars
  4. EGI = 48,000 + 600 − 3,360 = 45,240 dollars
  5. Operating Expenses
     • Management = 7 percent of 45,240 = 3,166.80 dollars
     • Taxes = 5,500 dollars
     • Insurance = 3,600 dollars
     • Flood = 1,800 dollars
     • Utilities = 1,200 dollars
     • Repairs and maintenance = 3,600 dollars
     • CapEx reserve = 3,600 dollars
     • Miscellaneous = 500 dollars
     • Total Operating Expenses ≈ 23,966.80 dollars
  6. NOI = 45,240 − 23,966.80 ≈ 21,273 dollars
  7. Annual Debt Service ≈ 28,457 dollars
  8. Cash Flow Before Tax = 21,273 − 28,457 = −7,184 dollars
  9. DSCR = 21,273 divided by 28,457 ≈ 0.75
  10. Cap Rate = 21,273 divided by 500,000 = 4.3 percent
  11. Cash-on-Cash = −7,184 divided by 125,000 ≈ −5.7 percent
  12. Break-Even Ratio = (23,966.80 + 28,457) divided by 48,000 ≈ 109 percent

• Interpretation

  • These assumptions produce negative cash flow and DSCR below 1. You can respond by negotiating price, increasing rents if market supports it, changing financing terms, increasing down payment, or tightening expenses and reserves where justified. Always run sensitivity scenarios before making an offer.

Screening and operations in Broward

A consistent, compliant leasing process protects your returns.

• Application components

  • Completed rental application, photo ID, and written consent for screening
  • Proof of income such as pay stubs or tax returns. Many landlords use an income threshold of 2.5 to 3 times the rent
  • Credit review and eviction history search
  • Criminal background review within fair housing guidance
  • Pet disclosures with pet rent or deposits if allowed

• Typical approval criteria

  • Minimum credit standards set by your policy, income at 2.5 to 3 times rent, no recent evictions, and verifiable rental history
  • Security deposits commonly around one month’s rent. Follow Florida Statute timelines for holding and returning deposits

• Legal basics

  • Florida Statutes Chapter 83 governs many landlord and tenant rules, including security deposit timelines and notices for nonpayment
  • Apply your screening policy uniformly and keep documentation of decisions and communications

Pulling it together: your underwriting checklist

• Gather 3 to 6 recent long-term lease comps for similar units nearby
• Test vacancy at 5, 7, and 10 percent, and add a small bad debt allowance
• Verify flood zone, wind coverage options, and estimate insurance premiums and hurricane deductibles. Add a storm reserve
• Pull 2 to 4 unit sales comps to set a realistic cap rate range for your submarket
• Model multiple loan scenarios such as owner-occupant programs versus investor financing and check DSCR under each
• Set maintenance and CapEx reserves by property age and inspection findings
• Document assumptions and run sensitivities for rent, expenses, and interest rate changes
• Confirm short-term rental rules before counting any STR income, and follow state and county requirements for screening and deposits

Ready to apply this to an actual duplex and pressure-test your numbers with local comps, insurance inputs, and DSCR targets? Reach out to schedule a quick strategy call. Marlene Harrison - FL is here to help you underwrite with confidence and move fast when the right deal appears.

FAQs

What vacancy rate should I use for a Fort Lauderdale duplex?

• A 5 to 10 percent vacancy allowance is common for long-term rentals, with older or higher-risk properties at the higher end. Always test multiple scenarios.

How do hurricanes affect insurance and reserves for Broward rentals?

• Expect higher premiums and hurricane deductibles often set at 2 to 5 percent of coverage. Budget flood insurance if required and add a hurricane reserve to your plan.

Can I underwrite short-term rental income in Fort Lauderdale?

• Only if you have confirmed that the property’s zoning and local rules allow short-term rentals and you can obtain required permits. Otherwise, underwrite long-term rents.

What DSCR do lenders look for on a 2-unit investment property?

• Many lenders target a DSCR between 1.20 and 1.35 or higher. Stronger DSCR improves financing options and terms.

What should I budget for maintenance and CapEx on a duplex?

• Routine maintenance often ranges from 1,200 to 3,000 dollars per unit per year. Add a separate CapEx reserve, commonly 150 to 300 dollars per unit per month for older properties.

How should I estimate Broward property taxes after purchase?

• Use current assessed value and millage as a baseline, consider your purchase price, and confirm any special assessments. Investor purchases do not receive homestead exemptions.