DSCR for Quadplexes in Florida

Quadplexes: maximizing income within residential financing limits

Quadplexes (four‑unit buildings) represent the upper limit of residential properties; beyond four units, properties are typically classified as commercial. Owning four rental units under one roof provides a robust income stream while still accessing residential financing, including DSCR loans. In Florida’s high‑growth environment—population rose from 21.5 million in 2020 to 23.3 million by 2024—quadplexes allow investors to serve diverse tenant demographics, from families to roommates to traveling professionals.

Statewide fair‑market rents show that three‑bedroom units rent for about $2,112, while four‑bedroom units average $2,478. In high‑demand metros like Fort Lauderdale, three‑bedroom units rent for about $3,297 and four‑bedroom units for over $4,000. A quadplex with a mix of two‑ and three‑bedroom units can generate substantial gross rent, often pushing DSCR well above lender minimums.

Understanding DSCR loans for quadplexes

A quadplex qualifies for DSCR financing under 2–4 unit guidelines. Lenders evaluate the property’s gross rent versus its debt obligations. Suppose each of four units rents for $1,800 (a conservative average across many Florida markets). Total monthly rent would be $7,200. If monthly mortgage, taxes, insurance and HOA fees total $5,000, the DSCR is 1.44. Most lenders require at least 1.1 or 1.2 DSCR; thus, the property easily qualifies.

Quadplex DSCR loans often require a credit score of at least 660, though some lenders accept scores as low as 550 with larger down payments. Minimum down payments are usually 25% for purchases, and maximum LTV ratios range from 70–80%. Borrowers must provide an appraisal, soft credit report, bank statements and proof of property ownership or purchase contract. Lenders typically do not require W‑2s or tax returns, but they may check for prior housing payment history and landlord experience.

Interest rates for DSCR quadplex loans average 7.5–9.5%. Some lenders offer interest‑only periods of 5–10 years, which can boost cash flow. Loans may include origination fees (1.5–2 points), underwriting and processing fees and closing costs totaling 3–6%. Prepayment penalties are common, especially for fixed‑rate DSCR mortgages.

Benefits of DSCR financing for quadplexes

Quadplexes produce four streams of income, which significantly improves DSCR resilience. If one unit is vacant, only 25% of the building’s rent is lost—unlike duplexes, where a vacancy eliminates half the rent. With four units, a landlord can diversify unit sizes (one‑bedroom, two‑bedroom, etc.) to appeal to different renters. In Florida, a two‑bedroom unit averages about $1,601, while a four‑bedroom unit averages $2,478, so mixing unit types can maximize gross rent. Quadplex owners can also provide amenities like on‑site laundry or private parking to justify slightly higher rents.

Because quadplexes remain under residential classification, investors can still use 30‑year fixed mortgages and avoid the balloon terms typical of commercial loans. DSCR financing, which requires no personal income verification, is particularly valuable for self‑employed investors or those managing multiple properties. Borrowers can also close in an LLC, offering liability protection and potential tax benefits.

Florida market dynamics for quadplex investments

The state’s rental data underscores the opportunity. In metro areas such as Miami, four‑bedroom units rent for an average of $3,527; in Fort Lauderdale, they exceed $4,000. Jacksonville’s four‑bedroom FMR is about $2,739 and Orlando’s about $2,960. These rents, combined with a statewide average rent of $1,752 and a median sale price around $410,400redfin.com, allow quadplexes to deliver compelling gross yields. For example, a quadplex purchased for $600,000 with total rent of $7,200 per month yields a gross rental yield of 14.4%. Even after expenses and debt service, the DSCR remains strong, enabling investors to finance additional properties.

Regional considerations matter. South Florida offers higher rents but also higher property taxes and insurance costs. Central Florida markets like Orlando provide balanced appreciation and rent growth. North Florida (Jacksonville, Pensacola) offers lower entry prices and solid rents, with occupancy rates often exceeding 95%. Investors should analyze property‑tax rates, insurance premiums (particularly windstorm coverage) and local regulations for quadplex properties.

Underwriting nuances and loan structuring

1. DSCR threshold and reserves. Lenders often require DSCRs of 1.1–1.5. Quadplexes should target DSCRs above 1.3 to account for higher maintenance and potential vacancies. Some lenders may require six months of reserves, especially if the borrower has limited multifamily experience.
   
2. Credit and down payment. A FICO score of 660 or above is standard. For quadplexes, lenders may request 25–30% down and limit the LTV to 70–75%. Higher down payments can improve interest rates and reduce origination fees.
   
3. Interest‑only options. DSCR loans often offer interest‑only periods of 5 or 10 years, boosting cash flow during the early years. Investors should plan for the eventual payment increase when amortization begins.
   
4. Entity ownership. Closing in an LLC is permitted. Lenders usually require all guarantors to be members of the entity and to personally guarantee the loan.
   
5. Appraisals and rent studies. Lenders order a market rental analysis to verify that projected rents are realistic. Accurate rent projections are critical; overestimating rents can jeopardize DSCR qualification.

Investment strategy: managing risk and maximizing returns

Managing a quadplex involves more complexity than smaller properties but can be highly rewarding. Key strategies include:

• Professional property management. With four tenants, professional management ensures consistent rent collection, compliance with local landlord laws and prompt maintenance. This supports stable DSCRs.
  
• Budget for capital expenditures. Four‑unit buildings have more systems (HVAC, plumbing) to maintain. Allocate reserves for future replacements.
  
• Diversify lease terms. Stagger lease expirations to avoid having multiple vacancies at once. This helps maintain DSCR.
  
• Consider value‑add improvements. Upgrades like adding washers/dryers, updating kitchens and installing hurricane shutters can justify higher rents. In Florida, hurricane‑resistant upgrades also reduce insurance premiums.
  
• Understand zoning and licensing. Some Florida municipalities require quadplex owners to obtain special licensing or inspections. Failing to comply can lead to fines or forced vacancies.

Pros and cons of DSCR financing for quadplexes

Pros

• High income resilience. Four units provide multiple income streams, keeping DSCR strong even with vacancies.
  
• Residential financing. Quadplexes can still use 30‑year DSCR mortgages with simpler underwriting.
  
• Asset protection. Ownership in an LLC is allowed, offering liability benefits.
  
• Scalability. Strong DSCR can support cash‑out refinancing to fund additional investments.
  

Cons

• Higher down payment and reserves. Expect to bring at least 25–30% down and hold reserves for maintenance.
  
• Management intensity. Four tenants mean more management. Hiring property management adds cost but is usually essential.
  
• Potentially higher insurance costs. Larger buildings may face higher windstorm insurance premiums, especially in coastal regions.

Mistakes to avoid

1. Overestimating rent. Use rent surveys and market data to set realistic expectations. Lenders rely on appraiser rent studies, so overinflated projections will be adjusted.
   
2. Ignoring maintenance. Quadplexes require regular upkeep. Neglecting maintenance can lead to vacancies and drop DSCR below lender requirements.
   
3. Not planning for vacancies. Always stress‑test DSCR with one unit vacant and lower rents. Ensure the loan still meets DSCR thresholds.
   
4. Choosing an inexperienced lender. Work with lenders familiar with Florida’s quadplex market. They can advise on insurance, local taxes and DSCR strategies.

Case study: buying a St. Petersburg quadplex with a DSCR loan

Maria finds a quadplex in St. Petersburg priced at $800,000. It has two two‑bedroom units renting at $2,200 and two three‑bedroom units renting at $2,600, yielding total monthly rent of $9,600. With a 25% down payment ($200,000) and an 8% DSCR loan, Maria’s monthly debt service including taxes and insurance is $6,400. The DSCR is 1.50, comfortably above the 1.1 minimum. Maria’s credit score is 700 and she has prior landlord experience, satisfying lender requirements. She also invests in hurricane shutters and updates landscaping, increasing property value and reducing insurance costs. After closing in her LLC, Maria hires a professional management company, which charges 8% of rents. Even after management fees and reserves, her property generates robust cash flow.

When planning, Maria stressed‑tested DSCR by assuming one three‑bedroom unit would sit vacant for two months. Under that scenario, DSCR dropped to 1.13—still above lender requirements. Because Florida rents have historically grown between 4–6% annually in markets like Jacksonville and similar growth is anticipated in Tampa–St. Petersburg, Maria expects to raise rents moderately over time. She also notes that DSCR loans generally have prepayment penalties, so she structures a five‑year interest‑only period with a step‑down penalty schedule.

Why Select Home Loans is ideal for quadplex investors

Select Home Loans stands out in the Florida market for its expertise in financing 2–4 unit properties. The firm offers DSCR loan programs designed specifically for quadplexes, with flexible down‑payment options and competitive rates. Their underwriters understand local rent dynamics and can pre‑qualify properties based on realistic DSCR projections. Investors also appreciate the ability to close in an LLC and to obtain guidance on insurance requirements and local regulations. With fast closings and a customer‑centric approach, Select Home Loans helps investors acquire quadplexes quickly, ensuring they don’t miss opportunities in a competitive market.

Website: SelectHomeLoans.com
Phone: 888-550-3296

Final thoughts 

Quadplexes deliver high income and risk mitigation by leveraging four rental units within the residential financing framework. DSCR loans allow investors to qualify based on the property’s cash flow rather than personal income, making them ideal for self‑employed individuals or those expanding portfolios. Investors should analyze local rent data, understand DSCR thresholds, budget for maintenance and work with experienced lenders. For Florida investors ready to maximize cash flow with quadplexes, Select Home Loans provides the expertise and speed needed to secure DSCR financing. Contact them to discuss your quadplex project, get pre‑qualified and start building a resilient Florida real‑estate portfolio.