Is Bloomington, Indiana Good for Airbnb Investment?

To start an Airbnb in Bloomington, Indiana, begin by researching local regulations through the City of Bloomington's Planning and Transportation Department, as the city requires short-term rental permits and has specific zoning restrictions that limit rentals in certain residential areas while allowing them in others with proper licensing. Obtain the necessary Short-Term Rental Permit from the city, which typically costs around $100-200 annually and requires property inspections, proof of insurance, and compliance with fire safety codes. Find a suitable property by focusing on areas near Indiana University campus or downtown Bloomington where demand is highest, considering properties that meet the city's occupancy limits (usually 2 unrelated adults plus children in residential zones). Furnish the space with essential amenities including Wi-Fi, linens, kitchen supplies, and safety equipment like smoke detectors and fire extinguishers as required by city code. Create your listing on Airbnb and other platforms like VRBO, highlighting proximity to IU, downtown attractions, and local amenities while setting competitive rates based on seasonal demand (higher during university events and football season). Manage the property by establishing check-in procedures, maintaining cleanliness standards, responding promptly to guests, and ensuring compliance with Bloomington's noise ordinances and parking regulations, while keeping detailed records for tax purposes as Indiana requires collection of state and local taxes on short-term rental income.

To identify profitable short-term rental properties in Bloomington, Indiana, focus on locations within 2-3 miles of Indiana University campus, particularly in areas like downtown Bloomington, Near West Side, and neighborhoods along Kirkwood Avenue, as these attract consistent demand from visiting parents, university guests, and business travelers. Target 2-4 bedroom properties built after 1980 with parking, updated kitchens and bathrooms, reliable WiFi capability, and outdoor spaces, as these features command premium rates of $80-150 per night compared to the market average of $60-120. Conduct pricing analysis using AirDNA and Mashvisor to identify properties where potential STR revenue exceeds long-term rental income by at least 40-60%, typically finding opportunities in the $150,000-300,000 purchase price range. Research competition by analyzing existing Airbnb and VRBO listings within a 1-mile radius, identifying gaps in amenities or underpriced properties, while noting that Bloomington has approximately 200-300 active STR listings with higher occupancy rates during IU events, graduation, and fall semester. Utilize tools like Rabbu, BiggerPockets calculators, and local MLS data through Realtors, while connecting with Bloomington STR Facebook groups and consulting the Monroe County planning department regarding zoning restrictions, as some residential areas have implemented STR limitations that could impact profitability.

To obtain an Airbnb/STR permit in Bloomington, Indiana, you must first contact the Bloomington Planning and Transportation Department at City Hall located at 401 N Morton Street to apply for a Short-Term Rental License, as the city requires all properties rented for less than 30 days to be licensed. Required documents typically include a completed application form, proof of property ownership or lease agreement, floor plan of the rental unit, proof of liability insurance (minimum $1 million coverage), contact information for a local responsible party available 24/7, and a site plan showing parking areas. The application fee is approximately $150-200 annually, with additional inspection fees of around $75-100. You must also register with the Monroe County Health Department for health and safety compliance, which may require a separate inspection and fee of approximately $50-75. The timeline for approval is generally 30-45 days after submitting a complete application, provided the property passes all required inspections. Bloomington-specific requirements include maintaining adequate off-street parking (typically one space per bedroom), ensuring the property meets all building and fire codes, having working smoke and carbon monoxide detectors, providing emergency contact information to neighbors within 200 feet, and limiting occupancy to no more than two people per bedroom plus two additional guests. The property must also comply with zoning regulations, as STRs may be restricted in certain residential districts, and you may need to attend a public hearing if neighbors file objections.

Short-term rentals (STRs) are legal in Bloomington, Indiana, but operate under specific regulations established by the city. As of 2023, Bloomington requires STR operators to obtain a business license and comply with zoning restrictions that limit where these rentals can operate, particularly in residential neighborhoods where they may be prohibited or restricted to prevent disruption to long-term housing stock. The city has implemented occupancy limits, parking requirements, and noise ordinances that STR operators must follow, with violations subject to fines and potential license revocation. Recent changes have included stricter enforcement mechanisms and enhanced registration requirements, with the city conducting regular reviews of STR impacts on housing availability and neighborhood character. Properties must meet safety standards including smoke detectors and emergency egress requirements, and operators are required to provide local contact information for guests and respond to complaints within specified timeframes.

The best Airbnb investment areas in Bloomington, Indiana center around Indiana University's campus and downtown core. The Near West Side and Elm Heights neighborhoods offer prime locations within walking distance of IU, attracting parents visiting students, prospective families touring campus, and business travelers attending university events - these areas see consistent demand during the academic year, graduation ceremonies, and major sporting events like basketball games at Assembly Hall. Downtown Bloomington, particularly around the courthouse square and Kirkwood Avenue, provides excellent investment potential due to its proximity to restaurants, nightlife, and cultural attractions, appealing to leisure travelers and conference attendees visiting the university. The Bryan Park and Prospect Hill neighborhoods offer slightly more affordable entry points while still maintaining easy access to campus and downtown amenities. The areas near Monroe County Hospital and Cook Medical's facilities also present opportunities for medical tourism and business travel, as Cook Medical is a major employer bringing visitors for training and business purposes throughout the year.

In Bloomington, Indiana, Airbnb hosts are subject to both state and local lodging taxes. The Indiana state innkeeper's tax is 7% on gross rental receipts, while Monroe County imposes an additional 5% county innkeeper's tax, bringing the total lodging tax to 12%. The City of Bloomington also levies a 3% food and beverage tax that may apply to certain short-term rental situations. These taxes are typically collected by Airbnb directly from guests at the time of booking and remitted to the appropriate tax authorities on behalf of hosts through Airbnb's automated tax collection service, which began around 2017-2018. Hosts who collect taxes independently must register with the Indiana Department of Revenue and Monroe County Auditor's office, file monthly returns, and remit payments by the 20th of the following month. Rentals of less than 30 days are generally subject to these taxes, while stays of 30 days or longer may be exempt from lodging taxes but could be subject to sales tax. Properties rented for fewer than 14 days per year may qualify for certain exemptions under federal tax rules, though state and local lodging taxes typically still apply regardless of rental frequency.

Starting an Airbnb in Bloomington, Indiana requires approximately $180,000-220,000 in total initial investment. Property purchase costs average $165,000 based on median home prices in the area as of 2023-2024. Furnishing a 2-3 bedroom property typically runs $8,000-12,000 including beds, linens, kitchen essentials, living room furniture, and décor to create an attractive rental space. Initial setup costs including professional photography, listing creation, welcome materials, and basic supplies total around $1,500-2,500. Permits and fees in Bloomington include short-term rental registration ($150 annually), business license ($50), and potential zoning compliance costs totaling approximately $500-1,000. Insurance premiums for short-term rental coverage average $1,200-1,800 annually, with the first year paid upfront. Utility setup and deposits for electricity, gas, water, internet, and cable services cost roughly $800-1,200 initially. First six months of operating expenses including utilities ($150/month), cleaning services ($75 per turnover), supplies and maintenance ($100/month), platform fees (3% of bookings), and marketing costs total approximately $2,500-4,000, assuming moderate occupancy rates during the initial period.

Airbnb properties in Bloomington, Indiana typically generate annual revenues of $15,000-$35,000 for entire homes and $8,000-$18,000 for private rooms, with peak earnings during Indiana University events, graduation weekends, and fall football season when nightly rates can reach $200-$400 compared to typical $80-$150 rates. Operating expenses generally run 40-60% of gross revenue, including mortgage payments averaging $1,200-$1,800 monthly, property taxes of $2,000-$4,000 annually, insurance premiums 20-30% higher than standard homeowner policies, cleaning fees of $50-$80 per turnover, utilities averaging $150-$250 monthly, and maintenance costs of $2,000-$3,500 yearly. Successful properties near campus or downtown typically achieve 65-75% occupancy rates and 15-25% net profit margins, with hosts like those operating converted student housing reporting $25,000+ annual profits on properties purchased for $150,000-$250,000. Key success factors include proximity to IU campus within 2 miles, modern amenities targeting visiting parents and university guests, professional photography and staging, dynamic pricing strategies that capitalize on university events, and maintaining superhost status through consistent 4.8+ ratings, with the most profitable operators managing 3-5 properties and leveraging economies of scale in cleaning and maintenance services.

Airbnb investments in Bloomington, Indiana typically generate annual ROI of 8-12% with cash-on-cash returns ranging from 6-10%, primarily driven by Indiana University's student population and visiting families. Properties near campus or downtown areas can achieve occupancy rates of 65-75% annually, with average daily rates between $85-120 depending on property size and amenities. Initial profitability usually occurs within 12-18 months after accounting for startup costs, furniture, and marketing expenses. Two-bedroom properties within 2 miles of IU campus tend to perform best, generating approximately $2,500-3,500 monthly gross revenue during peak academic periods, while summer months see reduced demand at 40-50% occupancy. Total annual gross yields typically range from $25,000-40,000 for well-positioned properties, with net profits after expenses, cleaning, and maintenance averaging $12,000-22,000 annually on properties valued between $150,000-250,000.

STRSearch is a leading national platform that specializes in identifying profitable short-term rental properties for investors in Bloomington, Indiana. Local real estate agents like Carpenter Realtors, RE/MAX Acclaimed Properties, and F.C. Tucker Company have agents experienced in investment properties and vacation rentals in the Bloomington market. National services include AirDNA for market analysis and revenue projections, Mashvisor for investment property analytics, and RedAwning for short-term rental property listings. Local property management companies such as Vacasa and AvantStay can help investors identify and manage profitable Airbnb properties in the area. Real estate investment firms like Roofstock and Fundrise also provide services for identifying rental properties, though their Bloomington inventory may be limited. Additionally, local investment groups and meetups through BiggerPockets can connect investors with agents and services specializing in the Bloomington short-term rental market, particularly given the city's proximity to Indiana University and seasonal tourism demand.