If you’ve been scrolling Zillow at midnight wondering whether an Airbnb or a long-term rental makes more sense in Indy right now, you’re not alone.

On paper, short-term rentals still look sexy. Big nightly rates. Fancy dashboards. “Passive income” screenshots all over Twitter. But 2026 is a different game than 2021—and Indianapolis investors are feeling it.

Let’s break down the real 2026 reality check on short-term vs long-term rentals in Indianapolis, including regulations, cash flow math, and risk—so you can make a decision that actually holds up long-term.

The Indianapolis Rental Market in 2026 (Quick Context)

Why this debate matters right now

Indianapolis has stayed relatively landlord-friendly compared to coastal markets, but the gap between perceived returns and actual returns is widening.

As of 2026:

• Median Indy home prices are hovering around $255K–$265K, depending on submarket.

• Average long-term rents are up roughly 4–6% year-over-year, driven by affordability pressure.

• Short-term rental supply has increased, especially near downtown, Fountain Square, and Broad Ripple.

That combo makes choosing the wrong strategy expensive.

What Counts as a Short-Term Rental in Indianapolis?

The basics investors need to know

In Indianapolis, a short-term rental (STR) is generally defined as a property rented for less than 30 days at a time—think Airbnb or VRBO.

As of 2026, STRs require:

• Proper zoning compliance

• A city registration

• Payment of local innkeeper’s taxes

• Adherence to occupancy and safety rules

The big takeaway? STRs are legal—but not passive and not universally allowed everywhere.

Short-Term Rental Rules in Indianapolis (2026 Update)

Why regulation risk is real (even if enforcement feels light)

Right now, Indy sits in a “moderately regulated” zone compared to cities like Chicago or Nashville. But that doesn’t mean you’re safe forever.

Key things to factor in:

• Neighborhood pushback is increasing in residential-heavy areas.

• HOAs and neighborhood associations can override city leniency.

• Rule changes typically hit STRs first during housing shortages.

This is why we always tell investors: don’t underwrite an STR deal assuming rules won’t change.

If you want a deeper dive into cash flow stress testing under rule changes, check out:
👉 https://rootsrealty.co/blog/analyze-cash-flow-indianapolis-rentals-2026

The Real Revenue Math: Airbnb vs Long-Term Rentals

Why gross income numbers lie

Most Airbnb calculators lead with gross nightly revenue. That’s the trap.

Let’s compare simplified 2026 numbers on a $260K Indy property:

Short-Term Rental (Optimistic Case):

• Average nightly rate: $160

• Occupancy: 60%

• Gross monthly revenue: ~$2,900

• Cleaning, management, utilities, supplies, taxes: ~$1,100–$1,400

• Net before mortgage: ~$1,500–$1,800

Long-Term Rental:

• Monthly rent: ~$1,750–$1,900

• Expenses (lower, predictable): ~$450–$600

• Net before mortgage: ~$1,200–$1,350

On paper, STRs can win—but the margin isn’t as dramatic as Instagram makes it look.

Volatility vs Stability: Pick Your Pain

Short-term rentals = income swings

With STRs, your income depends on:

• Seasonality

• Events

• Reviews

• Algorithm changes

• Tourism trends

One bad quarter can erase a whole year’s upside.

Long-term rentals = boring (in a good way)

Long-term rentals offer:

• Predictable cash flow

• Easier refinancing

• Cleaner books for lenders

• Less emotional management

That stability matters more in 2026 with higher interest rates sticking around.

Financing Differences Investors Miss

Lenders care how you rent

Many investors don’t realize:

• Some lenders won’t underwrite STR income

• Others haircut projected Airbnb revenue heavily

• Long-term leases are easier to refi or BRRRR

If your long-term plan includes refinancing or portfolio scaling, this matters—a lot.

For strategy-level thinking, this post pairs well:
👉 https://rootsrealty.co/blog/best-indy-investment-strategies-2026-buy-and-hold-vs-brrrr

Risk Comparison: STR vs Long-Term in Indy

Short-term rental risks

• Regulation changes

• Higher management intensity

• Income volatility

• Reputation-based platforms

• Burnout (yes, it’s real)

Long-term rental risks

• Tenant turnover

• Maintenance surprises

• Rent growth pacing inflation

Neither is risk-free—but STR risk is more external and uncontrollable.

Neighborhood Reality Check for STRs

Location matters more than strategy

Not all Indy neighborhoods behave the same.

STRs tend to perform better in:

• Downtown-adjacent areas

• Event-driven pockets

• Walkable entertainment zones

Long-term rentals shine in:

• Suburban-style neighborhoods

• Family-oriented areas

• Cash-flow-focused zip codes

If you’re curious where STRs still pencil, this is a helpful reference:
👉 https://rootsrealty.co/blog/best-indianapolis-airbnb-areas-2025-investors

What Experienced Indy Investors Are Doing in 2026

The quiet shift happening right now

We’re seeing a clear pattern among seasoned local investors:

• Fewer “pure” Airbnbs

• More long-term or hybrid strategies

• Underwriting STRs as long-term rentals first

That way, if regulations tighten or bookings slow, the deal still works.

We actually break this down deeper on the Roots podcast here:
🎙️ https://rootsrealty.co/podcast/short-term-vs-mid-term-rentals-the-real-winner-in-2026

So… Which Strategy Wins in Indianapolis?

The honest answer

There’s no universal winner.

Short-term rentals work when:

• You’re hands-on (or budget for management)

• You buy in STR-friendly pockets

• You can survive income swings

• The deal still cash flows long-term

Long-term rentals win when:

• You value predictability

• You want easier financing

• You’re scaling a portfolio

• You want sleep (underrated)

In 2026, most smart Indy investors are choosing boring-but-stable over flashy-but-fragile.

Final Take: Underwrite for Reality, Not Hype

If there’s one thing to remember, it’s this:

A good deal survives regulation changes, market shifts, and bad months.

Short-term rentals aren’t dead in Indianapolis—but the margin for error is thinner. Long-term rentals may not be exciting, but they’re quietly building wealth for investors who play the long game.

If you’re trying to decide which path fits your goals, Roots Realty Co can help you run the numbers before you buy.

Ready to explore Indy’s real estate opportunities?
Reach out to Roots Realty Co and let’s start your journey.