Gross yield
Gross yield is annual rent divided by the purchase price. It is a quick screening number, but it ignores costs and vacancy, so two properties with the same gross yield can perform very differently.
Use gross yield only to shortlist.
Net operating income
Subtract operating costs from rent: property tax, insurance, association fees, maintenance, management, utilities you pay and a vacancy allowance. The result is NOI before mortgage payments.
Use real quotes for insurance and ask for the association budget.
Cap rate
Cap rate is NOI divided by the purchase price. It lets you compare properties regardless of financing. A higher cap rate may come with more risk, such as older building, higher fees or weaker location.
Compare cap rates within the same type and area.
Cash-on-cash return
Cash-on-cash compares the annual cash left after mortgage payments to the cash you invested, including the down payment and closing costs. It shows the effect of financing.
Leverage can raise returns but also risk.
Florida-specific costs
Condo fees and potential special assessments, higher insurance, flood coverage where needed, property tax reassessment after purchase and rental rules can change returns. For short-term rentals add sales and tourist taxes.
Rent controls are limited in Florida, but market rents can change.
Vacancy and turnover
Plan for empty periods and tenant turnover costs: cleaning, repairs, marketing and agent fees. Short-term rentals are more sensitive to seasonality.
A conservative vacancy assumption protects your plan.
Common mistakes
Using the seller's tax and insurance numbers, ignoring assessments, trusting marketing returns, underestimating repairs and ignoring rental rules in the building.
Another mistake is mixing long-term and short-term assumptions.
Checklist
Get rent comparables. Request the association budget. Quote insurance. Estimate tax at the purchase price. Add vacancy and repairs. Compute NOI, cap rate and cash-on-cash. Stress-test for higher costs.
A simple illustration
Suppose a condo earns a given annual rent. Subtract property tax, insurance, association fees, a vacancy allowance and repairs to reach NOI, then divide by the price for cap rate. If fees or insurance rise, the cap rate falls quickly, which is why stress tests matter.
Comparing with other investments
Rental real estate is illiquid and requires management, while other assets are easier to sell. Consider diversification, your time horizon and tax position, and speak with an advisor about how real estate fits your plan.
Next step
Send us the properties you are considering and we will build a net return table with realistic costs. Not investment or tax advice. Lidiya Tretyak is a licensed Florida real estate agent with Douglas Elliman and speaks English, Russian and Ukrainian; the first consultation is free.
This guide is general information, not legal or tax advice. Laws and programs change — confirm details with a Florida attorney and a US tax professional.
