Renting Out Your Florida Keys Home: How Vacation Rentals Change Your Mortgage

Listing your Florida Keys home on Airbnb or VRBO can quietly change the kind of loan you qualify for, sometimes even if you only rent it a few weeks a year. In mortgage terms, a property is a primary residence, a second home, or an investment property based on how you use it, and renting to short-term guests often pushes it into the investment category with higher down payments and higher rates. This guide explains how the Keys' vacation rental rules interact with mortgage occupancy rules, so you understand what renting actually does to your financing before you list.

If you have not decided between buying a primary home, a vacation getaway, or a rental that produces income, start with my guide to primary vs second home vs investment property financing. This article is about the moment a plan changes: when you already own or are buying a Keys home and start thinking about renting it out, even part time.

Why Renting Changes Your Loan at All

Lenders do not classify your property by what you call it. They classify it by how you use it, and they have a specific word for that: occupancy. When you apply for a mortgage, you tell the lender whether the home will be your primary residence, a second home, or an investment property, and that answer drives everything else: the down payment, the interest rate, the reserve requirements, and even whether certain loan programs are available at all.

The catch is that the answer you give at closing is a promise about how you will use the home. If your actual use changes after closing, especially if it becomes a short-term rental, the loan's occupancy may no longer match reality. That is where most Keys homeowners get into trouble without realizing it.

Three Occupancy Types, the Way Lenders See Them

Every mortgage is underwritten against one of three occupancy definitions. Knowing the thresholds matters because the difference between "second home" and "investment property" is often just a matter of how often you rent it.

• Primary residence. You live in the home most of the year and it is your main address. This is the cheapest financing available: conventional loans can start around 3 to 5 percent down, and FHA and VA loans are generally only available for owner-occupied use.
• Second home. You personally use the home part of the year, typically at least 14 days a year, and you rent it no more than about 180 days a year, on an occasional basis. Second-home financing requires a 10 percent down payment for a well-qualified buyer, and rental income generally cannot be used to qualify for the loan.
• Investment property. You occupy the home fewer than 14 days a year and hold it mainly to generate rental income. Investment-property financing requires more down, typically 15 percent for a one-unit and 25 percent for two-to-four units, and it carries the highest rates because the borrower does not live there. See my investment property financing guide for the full picture.

The Florida Keys 28-Day Rental Rule You Need to Know

Before you build a plan around short-term rental income, understand how the Keys regulate vacation rentals, because it is different from most of Florida. In Monroe County, a vacation rental is any rental of under 28 days. In most residential land-use districts across unincorporated areas, including much of Key Largo and Tavernier, vacation rentals of under 28 days are unlawful, and where they are permitted, they require an annual Special Vacation Rental Permit plus a county business tax license. Rentals must run at least 28 consecutive days to the same tenant, and advertising must state that minimum.

Key West is even more restrictive. Transient rentals under 28 days require a city license plus a special manager license and a fire and life-safety inspection, but the city stopped issuing new transient licenses in residential zones years ago. In practice, only grandfathered properties operate legally, and those licenses generally do not transfer when a property sells. Notably, the short-term rental rights in Truman Annex expired at the end of 2025, so no rental shorter than one month is permitted there anymore. Marathon and Key Colony Beach are more permissive for weekly rentals, and Islamorada has its own caps and 28-day minimums in most zones.

These rules change and are enforced locally, so verify the current regulations with the county or city before you commit to a rental plan. What matters for your mortgage is the pattern I see over and over: buyers in the Keys who expect to list on Airbnb or VRBO are, in most communities, planning something that is either not legally permitted or requires a permit they may not be able to get.

How Listing on Airbnb or VRBO Reclassifies Your Mortgage

Even where short-term rentals are legal, listing the property on a vacation rental platform is the single fastest way to move your loan from second-home financing to investment-property financing. Underwriters take their occupancy cue from how you advertise and use the home. A property listed on Airbnb or VRBO, even occasionally, is usually treated as an investment property, because the intent is to produce rental income rather than to use the home yourself.

The practical result: a buyer who planned on a 10 percent down second-home loan may suddenly be looking at a 15 to 25 percent down investment-property loan with a higher rate. On a $950,000 Keys home, that is the difference between a $95,000 down payment and a $142,500 to $237,500 down payment. This is exactly why it is worth having the conversation before you sign, not after.

What Changes When a Loan Becomes Investment-Property Financing

The rate premium on an investment property is driven largely by loan-level price adjustments on non-owner-occupied loans, and it stacks on top of any market rate movement. Higher reserves mean more cash sitting in the bank after closing, on top of your larger down payment. And in the Keys, where many properties push into jumbo territory, the cash demands stack quickly.

The 12-Month Occupancy Rule Before You Convert

If you already bought the home as a primary residence or second home and now want to convert it to a rental, there is a timing rule you need to know. For conventional loans, Fannie Mae generally requires you to have lived in an owner-occupied property for at least 12 months before converting it to a rental. If you convert sooner, the lender may treat the original loan as occupancy fraud and, in some cases, can call the loan due.

There are limited exceptions, such as a documented relocation or a job change that moves you out of the home. But a genuine personal move is very different from buying a home with the intent to rent it out immediately. The intent at the time of application is what the lender underwrites, so be honest about your plans from the first conversation.

When Renting Can Actually Fit Second-Home Financing

Not every rental plan forces you into investment-property terms. Second-home financing allows occasional rental use, as long as you still personally occupy the home part of the year, you rent it well within the limits, and you do not count the rental income to qualify. In the Keys, a monthly or seasonal rental of 28 days or more, on a property you otherwise use yourself, can sometimes stay within second-home guidelines.

The key word is occasionally, and the threshold for what an underwriter considers occasional is far below full-time rental. If your plan is to cover the mortgage by renting the property most of the year, that is investment-property intent, and it should be financed that way from the start.

Why Projected Rental Income Often Can't Help You Qualify in the Keys

Investors often expect that projected Airbnb income will help them qualify for a larger loan. In the Florida Keys, that rarely works, for two reasons. First, because the 28-day minimum rule means most residential properties cannot legally generate short-term vacation rental income at all, there is often no legal projected income to count. Second, lenders generally will not underwrite a conventional loan against projected short-term rental revenue that is not permitted by local zoning.

If you genuinely want to use rental income to qualify, a DSCR loan, which is underwritten on the property's debt service coverage ratio rather than your personal income, is the more realistic path for Keys investors. I covered how that works for vacation rentals and what current DSCR rates look like. But even a DSCR loan depends on the property being a viable, legal rental, so the local rules still matter.

The Conversation to Have Before You Buy

If you already own a Keys home and are thinking about renting it, talk to me before you list. I have helped homeowners understand how conversion affects their existing loan and whether refinancing into the right occupancy makes sense. The refinance guide covers when that move is worth it.

Frequently Asked Questions

Ready to Talk About Your Keys Purchase?

Whether you are buying a second home in Key Largo, a vacation getaway in Islamorada, a rental in Marathon, or a property in Key West, the occupancy question comes first. I will help you structure the financing that matches how you actually plan to use the home, including whether a DSCR loan or conventional route fits better.

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