How DSCR Lenders Calculate Short-Term Rental Income in the Florida Keys

The single biggest question I hear from Florida Keys investors is how a DSCR lender decides what a vacation rental can actually earn. That number drives your down payment, your rate, and whether the deal qualifies at all, so it is worth understanding before you shop. This guide explains the three ways DSCR lenders calculate short-term rental income in 2026, the vacancy and expense haircuts they apply, and why the seasonal Keys market can work for or against you.

If you are new to the program, my DSCR loans for vacation rentals guide covers the basics of how the loan works, and my DSCR rate guide walks through what current pricing looks like. This article goes one level deeper into the part most people find confusing: exactly how the lender arrives at the rental income figure that feeds the ratio.

The Formula, and Why the Income Side Is Everything

Every DSCR loan comes down to one formula: DSCR = monthly gross rental income divided by the total monthly housing payment. The housing payment includes principal, interest, taxes, insurance, and HOA dues, all together. A ratio of 1.0 means the property's projected income exactly covers the payment. A ratio of 1.25 means it covers the payment plus 25 percent of it, which is the kind of cushion lenders reward with better pricing.

Because the housing payment is mostly fixed once you pick a price and a rate, the rental income figure is the variable that decides your fate. On a conventional loan you qualify on your personal income, so the property's rent barely matters. On a DSCR loan the property's projected rent is the entire qualification, so how that rent is calculated is the whole ballgame.

The Three Ways Lenders Calculate Short-Term Rental Income

Lenders generally accept one of three sources for the income side of a short-term rental DSCR loan. Each has its own strengths and its own pitfalls in a market like the Keys.

AirDNA Market Projections

The most common method for a property with no rental history is a market-based projection from a service like AirDNA. The lender takes the platform's estimate of what a comparable property in that area earns over a year, divides it by 12, and uses that as the monthly gross income. This works well for a new purchase where you have not yet hosted any guests, which describes most Keys acquisitions.

The catch is that the projection is only as good as the comparable set. A generic number for "Key West" will not reflect your specific street, your water depth, your dock, or your occupancy history. The appraiser and the lender should be looking at properties genuinely comparable to yours, and in the Keys that usually means the same water tier and the same level of boat access.

Actual Platform Income

For a property that already has a rental history, some lenders accept 12 months of documented income from the platform itself: your Airbnb or VRBO host dashboard, your 1099-K, or bank statements showing the deposits. Documented actual income is generally treated as the most reliable, because it is real money that really came in.

This matters most for a refinance or a purchase of a property with an established rental record. If the numbers show a strong, consistent season, that history can support a better DSCR than a generic market projection. It can also work against you: a property that sat empty for months, or one with a poor host history, will show a weaker number than the market average.

The Appraisal Rent Schedule

Some lenders rely on the appraiser's opinion of market rent, typically captured on a rent schedule or a short-term-rental addendum that the appraiser completes for the loan. For a vacant property, the appraiser's rent opinion can be the sole income source, so the quality of the appraisal matters enormously.

Here is the nuance Keys buyers should understand: a standard long-term rent schedule reflects what a tenant would pay on a 12-month lease, which is almost always far below what the same home earns as a vacation rental. Lenders who run short-term programs account for this by using a short-term-rental addendum or an AirDNA-based figure instead of the long-term lease number. If the lender on your deal is only looking at long-term rent, the projected income will be understated and your DSCR will look worse than the property really performs.

The Vacancy and Expense Haircut

Whatever the gross income source, lenders almost never use the full number. They apply a vacancy and expense factor to account for empty nights, cleaning, management, and wear and tear. The most common rule of thumb is the 75 percent rule: the lender counts only 75 percent of the projected gross income, effectively building in a 25 percent vacancy and expense cushion.

In practice the haircut varies. Some lenders apply a 20 to 25 percent reduction to an AirDNA gross projection, while documented 12-month actual income may get a smaller haircut of 10 to 15 percent because it is already real. The takeaway is simple: the income a DSCR lender counts is never the headline number you see on a rental listing or an optimistic pro forma. Plan your deal around the discounted figure, not the gross one.

This is exactly where the Keys seasonal market shows up. A waterfront home in Key West might command premium nightly rates in season and near nothing in the slow summer months. The lender's haircut is meant to smooth that seasonality into a defensible monthly number, so a property that looks wildly profitable at peak season can still come in at a modest DSCR once the full year and the vacancy factor are applied.

How the Seasonal Keys Market Shapes the Numbers

The Keys are a year-round vacation market, but the pattern is not flat. High season runs roughly from Thanksgiving through Easter, with a strong secondary bump in the summer. A property's annual gross income is a blend of peak-season rates and shoulder-season occupancy, and the DSCR calculation needs the whole year to make sense.

Three Keys-specific realities tend to move your DSCR:

• Insurance is a big part of the payment. Flood and windstorm coverage are folded into the total housing payment used to compute your DSCR, so two otherwise identical homes can qualify very differently once premiums are in the denominator. My flood insurance and wind insurance guides cover what those premiums look like.
• Water and boat access drive occupancy. Deep water, a dock, and a boat lift translate directly into rental demand, which is why the strongest DSCR deals in places like Marathon and Islamorada are almost always waterfront.
• Local rental rules vary by community. Short-term rental regulations differ between municipalities, and a lender's income projection assumes the property can legally be rented the way you plan. Confirm the local rules before you underwrite a deal around a specific occupancy number.

The practical effect is that a Keys DSCR deal often hinges on getting both the income source and the local property profile right. A generic projection on a canal-front home in Key Largo will not capture the premium your specific property can command, and the lender needs to see that in the appraisal or the platform data.

Interest-Only Options to Improve Your DSCR

If a property's projected income comes up short of the 1.0 or 1.25 ratio the lender wants, an interest-only structure is one of the most common fixes. With an interest-only DSCR loan, you pay only interest for a set period, typically five or ten years, before the loan converts to principal and interest. Because the qualifying payment drops, the same rental income produces a higher DSCR.

As an example, a property whose full principal-and-interest payment produces a DSCR of 1.05 might jump to 1.25 or higher on an interest-only payment, which can move it from a borderline deal to one that qualifies for better pricing. The trade-off is a slightly higher rate, usually on the order of a quarter point, and the fact that you are not building equity during the interest-only period. For an investor who plans to hold the property and refinance or sell within that window, it is often a reasonable tool. My DSCR loan program page and investment property page cover the program details in more depth.

What This Means Before You Commit

Before you make an offer on a Keys vacation rental with a DSCR loan, run the deal on the discounted income, not the optimistic one. Ask the lender which income source they will use, whether they accept short-term rental income at all, and what haircut they apply. Ask whether the appraisal will include a short-term-rental addendum or whether they will rely on a long-term rent schedule, because that single choice can change your DSCR by a wide margin.

It is also worth remembering how DSCR financing fits into your overall plan. A DSCR loan qualifies on the property, not your personal income, which is a real advantage for self-employed buyers and investors. But the classification matters for taxes and for your long-term strategy, and my primary vs second home vs investment property guide explains how those lines are drawn. If you are weighing a DSCR loan against a conventional vacation home loan on your personal income, the right answer depends on your tax picture and how much documentation you want to provide.

Frequently Asked Questions

Ready to Run Your Numbers?

I will show you exactly how your Keys vacation rental would be underwritten: which income source the lender will use, what haircut applies, whether an interest-only structure improves your DSCR, and what rate and down payment you can expect. That is the honest way to know whether a deal works before you commit, whether you are buying in Key West, Marathon, Islamorada, Key Largo, or anywhere along the Keys. No pressure, no jargon, just the math.

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