DSCR Loans in Indiana: The Tax Cap, the Landlord Rules, and the Indianapolis Permit

Indiana caps each property tax bill as a share of gross assessed value, and the cap depends on how the property is used. Indiana Code 6-1.1-20.6-7.5 sets the homestead cap at 1 cent per dollar of gross assessed value. Other residential property, which covers a single family house that isn't a homestead and any building with two or more units, is capped at 2 cents.

The lower cap belongs to owner occupants. The Department of Local Government Finance says a property needs the homestead standard deduction to get the 1 cent cap, and a homestead is the owner's principal place of residence. When an owner occupant sells to an investor, both can fall away.

Taxes that voters approve in a referendum also sit outside the caps. In a district with one, the bill can land above the cap.

I size the tax line from the rental class, not from the seller's bill. I'd rather budget high and be pleasantly wrong than the other way around.

Very little, by design. Indiana Code 32-31-1-20 says a city, town, or county may not regulate rent amounts on privately owned property unless the General Assembly authorizes it. The same section bars local rules on tenant screening, security deposits, lease applications, lease terms, required disclosures, the rights of the parties, and landlord fees.

A local ordinance that crosses that line is void. Property with government funding for reduced rents is carved out of the whole section, and for everyone else, rent, deposits, and lease terms stay on state rules from Evansville to South Bend.

Indiana gives a landlord 45 days to settle the deposit. Under Indiana Code 32-31-3-12, the landlord sends an itemized written notice of any deductions, with the balance, within 45 days after the lease ends and possession comes back. The clock doesn't bind the landlord until the tenant supplies a mailing address in writing.

Missing it is costly. The tenant can recover the full deposit plus reasonable attorney's fees, and the owner when the lease ends is the one held to it.

Late rent has its own short timeline. Indiana Code 32-31-1-6 lets a landlord end the lease on at least 10 days' notice when rent goes unpaid, unless the lease says otherwise or the tenant pays in full before the notice runs out.

It can, once the permit and zoning line up. Indiana Code 36-1-24 treats an owner occupied short term rental as a permitted residential use. For one the owner doesn't live in, a city or county may require a special exception, special use, or variance in a residential district, though it can't use that process to prohibit or unreasonably restrict short term rentals.

Indianapolis adds a permit layer. Chapter 852 of the Indianapolis Revised Code requires each short term rental unit to be permitted individually, once a year, through the Department of Business and Neighborhood Services. A permit expires one year after it is issued.

If a deal depends on nightly income, I ask for the permit status and zoning answer first. I also check how each program treats short term income before we count on it.

Here is what I ask for on an Indiana file. Most of it is already in a folder somewhere.

• The property address and the number of units
• The signed lease, or the monthly rent you expect
• The current tax bill, and whether the seller claimed the homestead deduction
• An insurance quote written for a rental
• For a short term rental, the Indianapolis permit or the local zoning approval

With that, I can tell you early whether the rent carries the full payment at the rental tax cap. That beats finding out after the appraisal.

Residential home loans in Maine and Florida. DSCR loans in 37 states. Indiana is on that list for DSCR investor loans, which the page describes as business purpose loans secured by non owner occupied residential investment property with 1 to 9 units, with no LLC or corporation vesting requirement for Indiana. Mobile and manufactured homes aren't part of these programs.