The Florida Keys remain one of the strongest vacation-rental markets in the United States. Limited supply, year-round tourism, high nightly rates, and strong repeat visitor patterns make the Keys uniquely positioned for investors. But performance varies dramatically by Key, zoning rules are strict, and operating costs are different from the mainland.
This 2026 guide breaks down everything investors need to know before purchasing a short-term rental in the Florida Keys, backed by real market structure, investor trends, and on-the-ground dynamics.
1. Understand the Legal Landscape
Short-term rental laws in the Keys vary by municipality and even by neighborhood. Understanding them upfront prevents expensive surprises later.
Key areas with short-term rental allowances (varies by zone):
- Key Colony Beach: One of the most rental-friendly areas; Investor favorite. Walkable, boater-friendly, and STR-friendly.
- Marathon: One of the best-performing STR markets. Weekly rentals common. Large canal communities.
- Islamorada: High nightly rates, strong luxury demand, and excellent fishing tourism. Certain neighborhoods permit 7 day rentals; others prohibit anything under 28 days.
- Key Largo: Best for proximity to Miami and consistent demand. Strong boating access. Mostly 28 Day minimum rentals
- Lower Keys: More residential, mostly 28 Day minimum rentals
- Key West: Different license categories Top tier ADR (average daily rate). Transient licenses are rare and expensive; huge revenue upside.
For a more in-depth break down of the rental market, check out this blog https://kelseycaputorealtor.com/blog/the-airbnb-market-in-the-florida-keys-explained
2. Cap Rates, Revenue Expectations & What’s Actually Performing in 2025
Vacation rentals in the Keys aren’t “cheap” investments, but they can be strong cash-flowing assets when purchased correctly.
Typical 2025 cap rate ranges:
- Waterfront homes with pools: 4%–7% cap rate
- Canal-front homes without a pool: 4%–5%
- Open-water luxury estates: 3%–5% (lower cap rate, highest appreciation)
- Condos with rental programs: 4%–7% depending on fees and amenities
What drives profitability:
- Proximity to open water (boaters pay premium rates)
- Pool, hot tub, and outdoor kitchen
- Updated interiors
- Sleeping capacity (optimizes per-night revenue)
- Walkability to restaurants/bars (especially in Key West & Islamorada)
Seasonality still rules:
- Peak demand: December–April
- Shoulder months: May, July, October
- Lower demand: Late August–September due to weather patterns
Successful operators price dynamically, adjusting rates daily based on demand.
3. Operating Costs in 2025/2026: What Investors Must Budget For
The Keys have higher operating costs than most Florida markets. Smart planning prevents cash-flow surprises.
Typical expenses:
- Management fees: 18%–25% for full-service, 10%–15% for co-hosting
- Cleaning fees: Passed to guests, but deep cleans still hit owner budgets
- Pool service: $100–$200/month
- Dock/piling maintenance: Varies widely, but should be budgeted annually
- AC servicing: 2–4 times per year due to salt air
- Insurance: Higher than mainland, but discounted for elevated homes with newer roofs
Budget for approximately 1%–2% of property value per year in maintenance given the marine climate.
4. What Guests Want and What Gets the Best Reviews
Your nightly rate and occupancy depend on meeting modern expectations.
Top guest priorities:
- Stylish, Clean, coastal-inspired interiors
- Impact windows & storm safety
- Dockage (deepwater is the gold standard)
- Outdoor living: kitchen, dining, shade structures
- High-speed internet for workcation travelers
- Gear: paddleboards, kayaks, bikes, beach carts
Photos matter. Homes with bright, natural coastal palettes outperform dark or dated interiors across all platforms. Homes staged and decorated get the most attention. People are spending a lot of money to rent a home versus staying at a hotel so they want to feel like their accommodation is 5 star!
5. ADR Ranges You Can Count On in 2026
For renovated 3–5 bedroom homes with a pool:
- Peak Season (Dec–April): $700–$1,200+ a night
- Shoulder Season: $450–$700 a night
- Late Summer/Fall: $300–$450 a night
Luxury canal and open-water homes trend toward the top of these ranges.
Occupancy Patterns
- Keys Average: 65–80%
- Peak Season: 85–100%
- Luxury segment: Strongest year-round
The Keys do not experience the extreme seasonal collapse seen in other Florida coastal markets. Tourism demand is too stable and too diversified.
At the same occupancy, a $1.5M vacation rental in Islamorada can outperform a similar home in Marathon by roughly $15K–$20K a year in gross income. Marathon, however, often makes it easier to actually hit 70–75% occupancy because of friendlier rental zoning and deeper STR infrastructure. The right play comes down to your risk tolerance, your design budget, and whether you’re optimizing for yield, lifestyle, or both.
The Florida Keys continue to outperform many vacation rental markets due to scarcity, year-round tourism, and high nightly rates. If you’re analyzing a property or want a customized investment breakdown, I can prepare a full report including cap rate, projected revenue, operating costs, and regulatory compliance.
Request a customized Florida Keys vacation rental investment analysis or STR zone review.
