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Short-Term Rental Investors in Southwest Florida Are Now Underwater as Regulations and Platform Fees Converge
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The short-term rental boom that swept southwest Florida during the pandemic years is unwinding, and the exit is not clean. According to Michael Byrd, a realtor with Realty One Group MVP, a convergence of municipal restrictions, rising platform fees, and oversupply has left a significant cohort of Airbnb investors unable to service their debt, and increasingly unable to sell their way out.
During the pandemic-era boom, short-term rental properties in southwest Florida were generating $8,000 to $9,000 per month in gross rental income for some operators, according to Byrd. Investors used DSCR loans – debt-service coverage ratio financing that qualifies borrowers based on rental income rather than personal income – with as little as 25% down to acquire properties. The numbers appeared to work.
That calculus has since deteriorated on multiple fronts simultaneously. Airbnb raised its host fees from a range of 8–12% to 14%, directly reducing operator net income. New apartment construction across the region has flooded the broader rental market, pushing down rates for all rental categories. And the short-term rental income that justified the original purchase prices has declined as travel patterns normalized from pandemic highs.
The result, according to Byrd, is that many investors who purchased in 2022 and 2023, near the peak of the market, are now carrying properties worth $80,000 to $150,000 less than their purchase price. “Most of these people are 80 to $150,000 underwater in their houses,” Byrd says.
Municipal Crackdowns
Beyond the financial squeeze, regulatory action at the city level has compounded the pressure. Byrd says Cape Coral now prohibits rentals of less than seven days, while parts of Tampa and St. Petersburg have moved to a 30-day minimum. These restrictions effectively convert short-term rental properties into long-term rentals, a fundamentally different business with lower revenue potential.
“The City of Tampa, St. Pete, Cape Coral – they’re really clamping down on these short-term rentals,” Byrd says.
For investors who underwrote their purchases on the assumption of short-term rental income, the shift to long-term rental economics is severe. In many cases, long-term rental rates in the current oversupplied market are insufficient to cover mortgage payments, insurance, and maintenance, particularly for properties purchased at 2022 prices with 2022 financing.
Municipal short-term rental restrictions are not unique to southwest Florida; they have been implemented in markets ranging from New York to New Orleans to Honolulu. But the concentration of pandemic-era speculative purchases in southwest Florida, combined with the severity of the local market correction, has made the consequences here particularly visible.
Distressed Inventory
The downstream effect is a growing volume of distressed properties entering the market through pre-foreclosure, short sale, and auction channels. Byrd is currently negotiating two short sales on listed properties and reports a rising volume of inbound calls from owners who cannot make their mortgage payments.
“I’ve seen a lot more pre-foreclosures,” Byrd says. “We’re getting a lot more calls – ‘Hey, this is the situation, I can’t make my payment. What can we do?”
Byrd draws a parallel to the post-2008 environment, noting that underwater owners face the same binary choice that defined that era: continue paying on a property they can barely afford, or walk away. Charlotte County, he notes, was leading the nation in foreclosures earlier in 2026 before that distinction shifted to the Tampa market.
For investors watching from the sidelines, this distressed inventory is creating buying opportunities. Byrd describes a colleague who recently acquired a corner-lot property at auction for $150,000, a home he estimates would sell for $240,000 after cosmetic repairs. “There’s still some deals to be had,” Byrd says.
Distressed Opportunity
At Realty One Group MVP, Byrd says his team has developed experience navigating the short sale and pre-foreclosure process, serving both distressed sellers and the investors looking to acquire their properties. The team’s familiarity with hyper-local market conditions, including which neighborhoods can support quick resale and which are still weighed down by storm history or insurance costs, is central to making these transactions viable.
Byrd advocates for creative financing structures as a path forward for some distressed owners, including subject-to arrangements where an investor assumes existing mortgage payments, or seller-financed deals with 15–20% down that allow the investor to collect rent while the rental income services the debt. “Right now is the time for creative solutions,” Byrd says.
Whether the volume of distressed short-term rental properties continues to grow will depend in part on how aggressively municipalities enforce their new restrictions and whether platform economics stabilize. But Byrd’s view is that the market has not yet fully absorbed the consequences of the pandemic-era buying surge, and that the next 12 to 18 months are likely to bring more inventory, more short sales, and more opportunities for buyers positioned to act quickly.
About the Expert: Michael Byrd is a Realtor with Realty One Group MVP and co-founder of the Savings Specialist Group, serving the corridor from Marco Island north through Fort Myers, Charlotte County, and into the Sarasota and Venice areas. He is a Marine Corps veteran who entered real estate in 2015.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
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