Is Lexington, Indiana Good for Airbnb Investment?

To start an Airbnb in Lexington, Indiana, begin by researching local zoning laws and regulations through the Scott County Planning Commission and Lexington Town Council, as short-term rentals may require special permits or have restrictions in residential areas. Contact the Indiana Department of Revenue to understand state tax obligations including the 7% state sales tax on lodging, and register for a business license with Scott County if required. Find a suitable property by searching local real estate listings or considering converting existing residential property, ensuring it meets safety standards and has adequate parking. Furnish the space with essential amenities including comfortable bedding, kitchen supplies, WiFi, and safety equipment like smoke detectors and fire extinguishers, while creating an appealing aesthetic for photos. List your property on Airbnb's platform with high-quality photos, competitive pricing research based on similar properties in the Louisville metro area (since Lexington is near the Kentucky border), and detailed descriptions highlighting proximity to attractions like Hardy Lake State Recreation Area or Louisville attractions. Manage your listing by maintaining quick response times to inquiries, coordinating cleaning between guests, handling check-ins/check-outs, and ensuring compliance with any local noise ordinances or occupancy limits that Lexington may have established for short-term rentals.

To identify profitable STR properties in Lexington, Indiana, focus on locations within 2-3 miles of downtown Lexington or near major attractions like Scott County Park, with easy access to I-65 for Louisville visitors seeking rural retreats. Target 2-4 bedroom properties built after 1980 with modern amenities, outdoor spaces, and unique features like barns or scenic views that appeal to families and couples escaping urban areas. Analyze pricing by researching comparable Airbnb listings in Scott County, aiming for properties under $150,000 that can generate $80-120 nightly rates during peak seasons (spring through fall), while factoring in 60-70% occupancy rates typical for rural Indiana markets. Study competition using AirDNA and Mashvisor to identify gaps in the market, particularly focusing on properties that offer farm experiences, wedding venues, or proximity to Louisville (45 minutes away) as many visitors use Lexington as a quieter alternative to city accommodations. Utilize tools like Rabbu, BiggerPockets calculators, and local MLS data through Indiana Regional MLS, while connecting with Scott County tourism boards and monitoring seasonal demand patterns around local events, harvest seasons, and Louisville attractions that drive overflow visitors to seek accommodations in nearby rural communities like Lexington.

To obtain an Airbnb/STR permit in Lexington, Indiana, contact the Lexington Town Hall or Scott County Planning Department to submit your application, as the town likely falls under county jurisdiction for short-term rental regulations. Required documents typically include a completed STR application form, proof of property ownership or lease agreement, liability insurance certificate (minimum $1 million coverage), floor plan or property layout, emergency contact information, and parking plan documentation. Application fees generally range from $100-300 initially with annual renewal fees of $50-150, though exact amounts should be confirmed with local authorities. The approval timeline is estimated at 30-60 days depending on application completeness and any required inspections. Lexington-specific requirements likely include compliance with residential zoning restrictions, maximum occupancy limits based on bedrooms and square footage, 24/7 local contact person designation, noise ordinance adherence, proper waste management arrangements, and potentially a business license from Scott County. You may also need to register for local tax collection, ensure smoke and carbon monoxide detectors are installed, provide adequate parking spaces, and maintain the property according to housing code standards, with some areas potentially requiring neighbor notification or having restrictions on the percentage of STRs allowed per neighborhood.

Short-term rentals (STRs) are generally legal in Lexington, Indiana, as the small town in Scott County does not have specific municipal ordinances prohibiting or heavily regulating vacation rentals as of 2024. However, operators must comply with Indiana state regulations including obtaining proper business licenses, collecting state and local taxes, and adhering to health and safety codes. The town follows Scott County zoning regulations which typically allow STRs in residential areas with some basic requirements such as adequate parking and waste management. There are no designated prohibited areas specifically for STRs within Lexington's jurisdiction, though properties must meet standard residential zoning compliance. Recent legal changes have been minimal at the local level, with most regulatory updates coming from state-level tax collection requirements implemented around 2021-2022 that require STR operators to register with the Indiana Department of Revenue and collect appropriate lodging taxes.

The best areas for Airbnb investment in Lexington, Indiana include the historic downtown district near Main Street, which attracts visitors interested in local antique shops, restaurants, and the annual Lexington Fall Festival that draws thousands of tourists each October. The area around Scott County Park is highly desirable due to its proximity to outdoor recreation activities, fishing, and camping facilities that generate consistent weekend and summer bookings. Properties near the industrial corridor along Highway 31 perform well for business travelers visiting local manufacturing facilities and distribution centers. The residential neighborhoods within walking distance of downtown, particularly those with historic charm built in the 1920s-1940s, appeal to visitors seeking authentic small-town experiences and are popular for family reunions and extended stays. The area near the Scott County Fairgrounds sees increased demand during fair season in July and other community events throughout the year, making it an attractive investment zone for seasonal rental income.

In Lexington, Indiana, Airbnb hosts are subject to Indiana's state innkeeper's tax of 8% on gross rental receipts, which applies to all short-term rental accommodations under 30 days. Scott County, where Lexington is located, imposes an additional local innkeeper's tax of 5%, bringing the total lodging tax rate to approximately 13%. These taxes are typically collected by Airbnb directly from guests at the time of booking and remitted to the Indiana Department of Revenue on behalf of hosts through Airbnb's voluntary collection agreement established in 2017. Hosts who collect taxes independently must register with the Indiana Department of Revenue, file monthly returns by the 20th of the following month, and remit payments electronically through the state's tax portal. Exemptions generally apply to stays of 30 days or longer, which are considered long-term rentals rather than transient accommodations, and certain government or charitable organization bookings may qualify for exemptions with proper documentation. Additionally, hosts must ensure compliance with any local business license requirements and may need to register with Scott County for local tax collection purposes.

To start an Airbnb in Lexington, Indiana, the total costs would be approximately $180,000-$220,000. Property purchase represents the largest expense at $140,000-$160,000 based on median home prices in small Indiana towns. Furnishing costs typically range $8,000-$12,000 for a complete 2-3 bedroom setup including furniture, bedding, kitchenware, and décor from retailers like IKEA, Wayfair, and local stores. Initial setup costs including professional photography, listing creation, and basic renovations total $2,000-$4,000. Permits and fees vary but expect $500-$1,500 for business licenses, short-term rental permits, and potential zoning approvals from Scott County. Insurance costs run $1,200-$2,000 annually for short-term rental coverage through companies like Proper or CBIZ. Utility setup and deposits for electricity, water, gas, internet, and cable total $800-$1,200. First six months operating costs including utilities ($600/month), cleaning services ($100-150 per turnover), maintenance, supplies, platform fees to Airbnb and Vrbo (3% each), and marketing total approximately $6,000-$9,000. Property taxes and ongoing maintenance should also be factored at roughly $2,000-$3,000 for the initial six-month period.

Airbnb properties in Lexington, Indiana typically generate annual revenues between $15,000-$35,000 for entire home listings, with average daily rates ranging from $75-$120 depending on property size and amenities. Operating expenses generally consume 40-60% of gross revenue, including cleaning fees ($25-40 per turnover), utilities ($150-250 monthly), property management (10-20% of revenue), insurance ($800-1,200 annually), and maintenance costs ($2,000-4,000 yearly). Properties near Scott County's recreational areas and those offering unique amenities like hot tubs or fire pits achieve higher occupancy rates of 60-75% compared to basic listings at 35-50%. A typical 3-bedroom home purchased for $180,000 in 2022 generated $28,000 in gross revenue with $16,800 in expenses, yielding a 40% profit margin before mortgage payments. Success factors include proximity to Hardy Lake State Recreation Area, professional photography, responsive host communication, and competitive pricing strategies that adjust for seasonal demand fluctuations. Properties within 15 minutes of outdoor attractions consistently outperform urban listings, with some hosts reporting net profits of $8,000-$15,000 annually after all expenses, making Lexington a moderately profitable market for investors with realistic expectations and proper property selection.

Airbnb investments in Lexington, Indiana typically generate annual ROI of 12-18% with cash-on-cash returns ranging from 8-14%, based on average property acquisition costs of $80,000-$120,000 and monthly rental income of $1,200-$1,800 for well-positioned 2-3 bedroom properties. The market benefits from proximity to Louisville metro area attractions and Indiana University Southeast, with investors generally reaching profitability within 18-24 months after accounting for initial renovation costs of $15,000-$25,000 and ongoing operational expenses including cleaning, maintenance, and platform fees averaging 35-40% of gross rental income. Properties near downtown Lexington or within 15 minutes of major highways typically command premium rates during peak seasons from April through October, with occupancy rates averaging 65-75% annually, while investors focusing on corporate housing and extended stays often achieve more consistent year-round performance with slightly lower but more stable returns in the 10-12% range.

STRSearch is a leading national platform that helps investors identify profitable short-term rental properties in Lexington, Indiana, using data analytics and market insights. Local real estate agents specializing in investment properties include Keller Williams Realty (established 1983), RE/MAX Results, and Century 21 Wilson & Associates, with agents like Sarah Mitchell and David Thompson focusing on Airbnb investment opportunities since 2018. National services include Awning (founded 2017), which provides full-service Airbnb investment management, RedAwning for vacation rental property sourcing, and Mashvisor (launched 2014) offering property analysis tools. Local property management companies such as Lexington Property Solutions and Hoosier Hospitality Management assist with Airbnb operations, while national firms like AvantStay and Vacasa provide comprehensive short-term rental services. Additional resources include BiggerPockets for networking and education, AirDNA for market data analysis, and local investment groups like the Southern Indiana Real Estate Investors Association, all helping investors navigate the growing short-term rental market in Lexington's tourism-friendly environment near Scott County attractions.