Investment Property

Types of Bloomington investment property

• Single-family homes. Houses across town, from older homes near campus to newer subdivisions. How many unrelated people can legally live in one depends on its zoning (more on that below).
• Condos. Lower exterior upkeep, but the association’s rules come first. Some associations limit or prohibit rentals, so read the declaration and rules before you make an offer.
• Small multi-unit buildings. Duplexes and small buildings near downtown and campus. Ask how each unit is permitted and how utilities are metered.
• Properties outside city limits. Homes in Monroe County outside Bloomington aren’t covered by the City’s rental program. They often have septic systems and private wells, which bring their own upkeep.

[Tarah: add any property types or parts of town you want to mention, by location and building type only.]

City of Bloomington rental rules

This is the part I always want investors to read first. The City’s Housing and Neighborhood Development department (HAND) runs Bloomington’s rental program under Title 16 of the Bloomington Municipal Code.

Registration and inspection

According to HAND, all rental properties inside Bloomington’s city limits, except Indiana University’s, must be registered with and inspected by HAND. The owner submits a registration form, HAND schedules an interior and exterior inspection, and the owner receives a report listing any needed repairs. Once the property passes, HAND issues a residential rental occupancy permit. The City says permits run for three, four, or five years, depending on inspection results and compliance history.

HAND’s page also explains that new construction and renovated rentals must be registered and inspected before tenants move in, and that maintaining an unregistered rental can bring a fine.

Occupancy limits

Each rental occupancy permit shows the maximum number of occupants for that unit. That number comes from zoning. The City explains that in residential single-family zones, the limit is typically a single family or three unrelated adults, and that some properties are grandfathered for more. Don’t count on a higher number until you’ve confirmed it with the City for that specific address.

For rentals with four or fewer units, the City also requires an occupancy affidavit, kept current as tenants change.

Before you make an offer

• Ask the seller for the current rental occupancy permit, its expiration date, and the most recent inspection report.
• Confirm the permitted occupancy for the address with HAND or the Planning and Transportation Department.
• Ask HAND what a change in ownership means for the existing permit and registration.
• Look at what repairs a recent inspection called for, and whether they were finished.

Rules change, so check HAND’s current pages or call the office at 812-349-3420 before you rely on any of this.

Due diligence on a rental

• Leases. Get copies of every current lease. Note the end dates, deposits held, and any promises made to tenants.
• Income and expenses. Ask for actual records, not projections: rent collected, utilities the owner pays, repairs, insurance, and property taxes.
• Property taxes. An owner-occupied home and a rental can be taxed differently, because the homestead deduction applies only to a primary residence. Check with the Monroe County Auditor’s office about how a change in use affects the tax bill.
• Inspection. Hire a home inspector, and read the City’s most recent rental inspection report alongside it.
• Insurance. A rental needs a landlord policy, not a standard homeowners policy. Get a quote before you’re committed.
• Financing. Lenders treat investment property differently from a home you’ll live in. Talk to your lender early about down payment and terms.

Managing the property

Decide early whether you’ll manage the property yourself or hire a property manager. Self-managing means handling showings, leases, repairs, City inspections, and tenant calls. A manager handles those for a fee. If you live out of town, or you’re an IU parent buying for a student, a local manager can make the City’s inspection process much easier to keep up with.

Ask any manager you interview how they handle HAND inspections, occupancy affidavits, maintenance requests, and turnover between leases. [Tarah: if you keep a list of local property managers to share on request, mention it here, like your lender list.]