STR in SoCal - best area

[Lucy Richardson]

Hi, I’m new to the forums and looking for advice on purchasing my first investment property. My husband and I have about $140k saved up that we could use for a down payment and closing costs. We are trying to decide if we should look for a cheap multi unit to do ltr or purchase a str rental property in a vacation market that we could self manage. We live in Orange County and would like to buy a place within a few hours driving distance. We’ve looked in Palm Springs but it seems very seasonal and hard to cash flow on top of a mortgage. Any suggestions for best markets in Southern California to purchase a str right now? We’ve just started looking at mashvisor to find comps but the amount of information and options can be overwhelming. 

[Mark Futalan]

@Lucy Keilbach

Palm Springs has one of the most regulated STR programs around. I wouldn't categorize it as seasonal as the desert and surrounding areas around PS get year round traffic, though I would agree some months are better than others. JT/Yucca Valley are popular areas and some unincorporated areas of San Bernardino/Riverside county. Many of the desert cities like RM, Cat City, PD and even La Quinta have restricted or even limited STR's.

[Amanda Jacobellis]

HI Lucy,

Yes STRs are getting more and more regulated but you can still find them. The market is a bit crazy but my buyers are still having luck in Big Bear, certain HOAs in the desert, Joshua tree and yucca valley as well as along the coast near Santa Barbara. We are also seeing multi family prices dipping and an opportunity to buy into that type of investment. Areas that are going big in STR are having housing shortages. It depends on if you are seeking cash flow or long term appreciation in your investment model. Also its COMPETITIVE right now. There is a major lack of inventory so we can go over what that will mean for your as in investor but basically anyone buying right now needs to have a Strong offer, meaning, less or no contingencies and some cash if possible, will give you a little leverage. We are seeing 35 offers on some places, its a bit crazy. Happy to chat with you

[Lucy Richardson]

Hi thank you both so much for the advice. We just purchased our primary residence in Orange County in December so we got a taste of how competitive the SoCal market is right now in terms of contingencies, etc. Amanda, I really appreciate the offer to chat about options. I'll give you a call soon and look forward to connecting. 

[Peter Mckernan]

@Lucy Richardson I would second a lot of what both Amanda and Mark mentioned. I would stay away from Palm Springs, Palm Desert, and La Quinta due to their strict laws against new STRs owners coming into the area. They have put up a lot of red tape and some cities are at their limit of STR licenses.

Across the Yucca Valley, Joshua Tree and 29 Palms areas there has been an uptick in STRs, 500+ and counting. Yucca Valley and Joshua Tree have increased significantly in STRs and the infrastructure in Yucca Valley verse Joshua Tree is a lot better; however, there is the JT Park entrance through Joshua Tree. The 29 Palms area has a big project going up downtown to create new shops, new visitor center and more restaurants along with having another JT Park entrance on the south side of the city. Joshua Tree and Yucca Valley are competitive and 29 Palms, there are some properties that have a great value add in all three areas to become great STRs. (do not forget about Pioneer Town in Yucca Valley).

Big Bear is a great spot too, just know that they have a city council meeting to "table" the STR conversation due to the impact there has been in that town. They are still allowing STRs there, just keep an eye on all the cities and other county pockets that are watching the STR investments closely.

[Lindsey Iskierka]

Hi Lucy!  

In my opinion, I think purchasing a small multi-family home close to you or even in Riverside County would be a more stable option than a STR. Regulations are really getting more and more strict like everyone mentioned, but small multi-family homes could cash flow potentially with the capital you have available.

There's always demand for rentals in SoCal and Riverside County is appreciating like crazy. Which means you could still purchase an "affordable" investment property and benefit from likelihood of it appreciating rather quickly; then you could leverage that property to purchase a STR to tap in to that market.

My advice would be to purchase a more stable option without the high turnover and unknowns of a STR for your first investment property and then diversify once you have some cash flow coming in and your property has appreciated.

I hope that helps!  I'm here if you have any questions at all.