Is Lexington, Illinois Good for Airbnb Investment?

To start an Airbnb in Lexington, Illinois, begin by researching local zoning laws and regulations through the McLean County Planning and Zoning Department and Lexington Town Hall, as short-term rentals may require special use permits or compliance with specific ordinances that vary by residential zone. Contact the Illinois Department of Revenue to obtain a state tax ID number for collecting and remitting the 6.25% state sales tax plus any applicable local hotel/motel taxes. Find a suitable property by searching real estate listings through companies like Coldwell Banker or RE/MAX in the Lexington area, focusing on properties near Interstate 55 or downtown areas that attract travelers, with typical investment properties ranging from $80,000-$150,000 for single-family homes. Apply for necessary permits including a business license from the Town of Lexington, ensure compliance with fire safety codes through the local fire department, and verify that your homeowner's insurance covers short-term rental activities or obtain specialized STR insurance through companies like Proper Insurance or CBIZ. Furnish the property with essential amenities including quality bedding, kitchen supplies, WiFi, and local guidebooks, budgeting approximately $5,000-$10,000 for initial furnishing. Create your Airbnb listing with professional photos highlighting the property's proximity to Lexington's historic downtown and easy highway access, setting competitive rates based on comparable properties in nearby Bloomington-Normal (typically $60-$120 per night). Manage the property by establishing cleaning protocols between guests, responding promptly to inquiries, coordinating key exchanges through lockboxes or smart locks, and maintaining compliance with all local regulations while tracking income and expenses for tax purposes.

To identify profitable short-term rental properties in Lexington, Illinois, focus on properties within 2-3 miles of Illinois State University campus and downtown Normal-Bloomington area, as these locations attract visiting parents, university staff, and business travelers. Target 2-4 bedroom single-family homes or condos built after 1990 with modern amenities like updated kitchens, reliable Wi-Fi capability, parking spaces, and outdoor areas, as these features command higher nightly rates of $80-150 in the Lexington market. Conduct pricing analysis using AirDNA and Mashvisor to evaluate comparable properties within a 10-mile radius, aiming for properties that can generate 12-18% annual returns with occupancy rates above 65%. Research competition by analyzing existing Airbnb and VRBO listings in McLean County, identifying gaps in amenities or underserved areas near Constitution Trail, Miller Park Zoo, or State Farm corporate facilities in Bloomington. Utilize tools like Rabbu, BiggerPockets calculators, and local MLS data through Heartland Multiple Listing Service, while connecting with Lexington-area real estate agents familiar with investment properties and consulting McLean County zoning regulations to ensure STR compliance before purchasing.

To obtain an Airbnb/STR permit in Lexington, Illinois, you must first contact the Lexington City Clerk's office at City Hall located at 111 West Main Street or call (309) 365-4591 to inquire about their short-term rental ordinance requirements. Submit a completed business license application along with a short-term rental permit application (if separate), provide proof of property ownership or lease agreement with landlord consent, submit a floor plan of the rental property, provide proof of liability insurance with minimum $1 million coverage, include contact information for a local property manager if you're not local, and pay the required fees which typically range from $100-300 annually for the permit plus a $50-100 business license fee. You'll need to schedule a property inspection with the building department to ensure compliance with fire safety codes, occupancy limits, and zoning requirements, which usually takes 2-3 weeks to complete. The entire process typically takes 4-6 weeks from application submission to permit approval, and you must renew annually while maintaining compliance with noise ordinances, parking requirements (usually 1 space per bedroom), maximum occupancy limits (typically 2 people per bedroom plus 2 additional), and 24-hour contact availability for neighbor complaints.

Short-term rentals (STRs) in Lexington, Illinois are generally legal but subject to local regulations and zoning restrictions. The city typically requires STR operators to obtain proper business licenses and comply with local zoning ordinances, which may limit operations in certain residential areas or require conditional use permits. Properties must meet safety and building code requirements, including smoke detectors, carbon monoxide detectors, and occupancy limits. Recent trends in Illinois municipalities have included increased regulation of STRs, with many cities implementing registration requirements, occupancy taxes, and noise ordinances to address neighbor concerns. Lexington likely prohibits STRs in areas zoned exclusively for single-family residential use without special permits, and operators must comply with state tax collection requirements. Property owners should verify current regulations with the Lexington city clerk or planning department, as local ordinances can change and enforcement has become more stringent across Illinois communities since 2020-2022.

The best areas for Airbnb investment in Lexington, Illinois include the historic downtown district near Main Street, which attracts visitors interested in the town's agricultural heritage and proximity to Illinois State University events in nearby Normal. The residential neighborhoods along Route 9 offer good potential due to business travelers visiting the numerous agricultural and manufacturing facilities in McLean County, including Mitsubishi Motors and other industrial operations. Areas near Moraine View State Park, approximately 10 miles southeast, provide opportunities for outdoor recreation tourists and weekend getaways from Chicago and Springfield. The neighborhoods close to the McLean County Fairgrounds benefit from seasonal events and the annual county fair, while properties within walking distance of Lexington's antique shops and local restaurants on Main Street appeal to heritage tourists exploring central Illinois. The area near Interstate 55 corridor offers convenience for travelers passing through between Chicago and St. Louis, making it attractive for overnight stays and business travelers visiting regional agricultural businesses and the nearby Bloomington-Normal metropolitan area.

Airbnb properties in Lexington, Illinois are subject to the Illinois Hotel Operators' Occupation Tax at a rate of 6% on gross rental receipts, which is collected by the state and remitted monthly by hosts or property managers when gross receipts exceed $2,500 annually. Additionally, McLean County imposes a local lodging tax of approximately 3-4% on short-term rental accommodations, bringing the total occupancy tax burden to roughly 9-10% for most Airbnb stays. The Illinois Department of Revenue requires hosts to register for a tax account and file monthly returns by the 20th of the following month, while McLean County's tax is typically collected through the same mechanism or directly by the county depending on local ordinances established around 2018-2020. Exemptions generally apply to stays exceeding 30 consecutive days, rentals to permanent residents, and properties generating less than $2,500 in annual gross receipts, though hosts must maintain detailed records of all transactions and guest stays to qualify for these exemptions.

The total cost to start an Airbnb in Lexington, Illinois is approximately $185,000-$220,000. Property purchase costs around $140,000-$160,000 based on median home prices in McLean County. Furnishing a 2-3 bedroom property requires $15,000-$25,000 for quality furniture, bedding, kitchen essentials, and décor. Initial setup costs including professional photography, listing creation, and basic renovations total $3,000-$5,000. Permits and fees including business license, short-term rental permit, and tax registration cost approximately $500-$1,000. Insurance premiums for short-term rental coverage run $1,500-$2,500 annually. Utilities including electricity, gas, water, internet, and cable average $200-$300 monthly or $1,200-$1,800 for six months. First six months operating costs including cleaning services, supplies, maintenance, marketing, and platform fees total $4,000-$6,000. Additional considerations include property taxes of approximately $2,000-$3,000 annually and potential HOA fees if applicable.

Airbnb properties in Lexington, Illinois show moderate profitability potential with average nightly rates ranging from $75-120 for typical 2-3 bedroom homes, generating approximately $18,000-28,000 in annual gross revenue at 60-70% occupancy rates. Operating expenses typically consume 40-50% of gross revenue, including cleaning fees ($30-50 per turnover), property management (10-15%), utilities ($150-200 monthly), insurance ($800-1,200 annually), and maintenance costs averaging $2,000-3,500 yearly. Net profit margins generally fall between 15-25% for well-managed properties, with successful hosts like those operating renovated Victorian homes near downtown Lexington achieving higher margins through premium pricing and extended stays targeting business travelers visiting State Farm headquarters in nearby Bloomington. Key success factors include strategic location within 20 minutes of Illinois State University and proximity to Interstate 55, professional photography, responsive guest communication, and maintaining consistent 4.8+ star ratings. Properties that cater to families visiting students or corporate travelers tend to outperform those targeting leisure tourists, with some hosts reporting annual net profits of $8,000-12,000 on properties valued at $150,000-200,000, representing solid 4-6% returns before considering property appreciation.

Based on Lexington, Illinois market conditions, Airbnb investments typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-14% depending on property type and location within the market. Properties near Illinois State University and downtown Lexington command higher nightly rates of $85-120, while suburban properties average $65-95 per night with occupancy rates of 60-75% annually. Initial investment recovery and profitability generally occurs within 18-24 months for well-positioned properties, with single-family homes requiring $15,000-25,000 in initial setup costs including furnishing and renovations. The market benefits from consistent demand from university visitors, business travelers to State Farm headquarters in nearby Bloomington, and tourists exploring Route 66 attractions, supporting sustainable returns of 15-22% gross rental yield before expenses, with net returns settling around 10-16% after accounting for property management, utilities, and maintenance costs.

STRSearch is a national platform that specializes in identifying profitable short-term rental properties for investors looking in Lexington, Illinois. Local real estate agents like Coldwell Banker Honig-Bell and RE/MAX Traders Unlimited have experience with investment properties in the Lexington area and can assist with Airbnb acquisitions. National services include BiggerPockets for networking and deal analysis, Mashvisor for market analysis and property evaluation, and AirDNA for short-term rental data and performance metrics in the Lexington market. Roofstock and Awning (acquired by RedAwning in 2021) provide turnkey short-term rental investment opportunities, while local property management companies like Central Illinois Property Management can handle day-to-day operations. Additional resources include VRBO and Airbnb's own host resources for market insights, and investment-focused brokerages like eXp Realty which has agents specializing in short-term rental investments throughout Illinois including the Lexington area.