Hi There
I'm from Los Angeles, CA and have 7 years of experience operating vacation rentals across the country via master leasing them. I have never operated one in the Palm Springs area but Im interested in buying a non HOA vacation rental in the Palm Springs/Desert area. If you had to buy a non HOA, non condo, vacation rental with the highest ROI, Cap Rate, & COC return in the area, where and what would you buy? I have up to 250K of my own money as a down payment. My company will be the property manager of the home.
Thank you to all of the Palm Spring area experts in advance!
Dave
After owning rentals in both Palm Springs and Palm Desert, I'd argue that Palm Springs draws a more affluent crowd. Especially those looking for a more design-forward cultural experience. Palm Springs really has all the buzz these days. This might be a sweeping generalization, but I'd say PS tends to draw more city dwellers, PD more suburbanites. El Paseo tends to only be an attraction for significantly OLDER guests (not that there's anything wrong with that). Also, take it from me, that 29-day minimum will kill your business. I believe there's an exemption for rentals in the R3 zone, so it might be worth exploring those properties (generally located within a couple of blocks of El Paseo). You might also explore La Quinta. Others can give you a better perspective on that market. Finally, I agree with what you say about buying a 3/2 in Palm Springs--since that's the bulk of the market. I know that some residents avoid buying in the northern part of Palm Springs because of the wind, but I'm not sure how much difference it makes in the short-term rental market. I know that Racquet Club, for example, is attractive to renters because of its wealth of stylish, mid century properties. At any rate, just my opinion.
Hi There,
I haven't personally purchased property in PS or PD yet but am doing research into doing so and I'm happy to share what I've discovered so far.
I don't know how much you know about these cities and sorry if any of this is redundant info.
Palm Desert does not allow short-term rentals of stays less than 29 days so keep this in mind. Having said that, I do feel that Palm Desert is more recession-resisitant than Palm Springs as it attracts a more affluent crowd. If looking in Palm Desert, from what I've found, the closer you are to the Paseo, the better. The Paseo is the main shopping area where all the high-end retailers are. Just south of the Paseo in the Shadow Mountain neighborhood, there are some great MCM and Spanish homes on nice sized lots.
In Palm Springs, you want to stay away from the typical 3/2s as there is an overabundance of these available for rent so 2/2s and 4/3s, etc are your best bet. Well-designed homes have greater appeal since everyone wants to look good taking pictures while on vacation so think "Instagram-worthy" in terms of aesthetics. You want to, in general, stay away from North Palm Springs as it gets very windy area but this area is "up-and-coming" and you get more for your dollar up there. When I stay in Palm Springs, I do avoid North Palm Springs like the plague though in terms of lodging due to the winds and have crossed it off the list in terms of our acquisition search as well.
Th Movie Colony, Old Las Palmas, Vista Las Palmas, and Historic Tennis Club are a few of the nicer areas and Tahquitz River Estates and Midtown are more affordable but still nice.
Hope this helps and good luck!
@Jason Kudo Really appreciate it. What are your thoughts on STR in La Quinta, Indio, Desert Hot Springs, and Coachella?
After owning rentals in both Palm Springs and Palm Desert, I'd argue that Palm Springs draws a more affluent crowd. Especially those looking for a more design-forward cultural experience. Palm Springs really has all the buzz these days. This might be a sweeping generalization, but I'd say PS tends to draw more city dwellers, PD more suburbanites. El Paseo tends to only be an attraction for significantly OLDER guests (not that there's anything wrong with that). Also, take it from me, that 29-day minimum will kill your business. I believe there's an exemption for rentals in the R3 zone, so it might be worth exploring those properties (generally located within a couple of blocks of El Paseo). You might also explore La Quinta. Others can give you a better perspective on that market. Finally, I agree with what you say about buying a 3/2 in Palm Springs--since that's the bulk of the market. I know that some residents avoid buying in the northern part of Palm Springs because of the wind, but I'm not sure how much difference it makes in the short-term rental market. I know that Racquet Club, for example, is attractive to renters because of its wealth of stylish, mid century properties. At any rate, just my opinion.
@David G. Happy to share. My thoughts on Desert Hot Springs is that it is closer to Joshua Tree and during music festival season you'll get an uptick in demand from those looking for places that are easy access to Joshua Tree and the festivals while being close to Palm Springs. During festival season, Palm Springs experiences this uptick as well since JT doesn't have much going for it in terms of retail and hospitality and don't forget that there are music festivals in and around Coachella too which creates demand down that way during festival season.
I agree with @Tim Spry in that the PD crowd is older than the PS crowd. Most PD goers are retired and have the expendable income to vacation while the PS crowd is more of a younger, party crowd. In terms of affluence, you can certainly make a case for either one.
Indio and and La Quinta are more like the PD crowd and I'd throw Rancho Mirage into that mix too. Mainly retired and golf enthusiasts but again with the music festivals in JT and Coachella, this crowd is definitely getting younger. Golf is becoming super trendy with the younger crowd too.
Thermal is becoming more and more developed and is becoming a hotspot for UHNWIs because of The Thermal Club and The Thermal Beach Club so we can expect the stretch between Coachella and Thermal to fill in.
Hope this helps!
@Jason Kudo what do you think about investing in STR's right next to Joshua Tree National Park?
@Dave Rendo Well, in December 2019 alone, more than 300,000 people visited the National Park. Even if only half of them were not visiting just for the day, that's a lot of lodging that is required and if you've been to JT, you know that there are limited choices in terms of lodging. The park sure will not accommodate all these people even with all of the campgrounds inside the park. Sure, there are some hotels in Yucca Valley but staying in JT has a different vibe than YV and even with the hotels in YV, the short-term rental market in JT is in high demand, COVID19 aside. So much so that SB County had to scramble to create restrictions on what people can and cannot do with their properties in terms of STR's. You can't just buy a 5acre parcel (which is a common division in JT), stick a bunch of yurts and trailers on said property, and rent them out individually. Regardless of the new restrictions, the opportunity is there and people are taking advantage of it. I've helped a friend purchase a vacation home/part-time STR, am working with a few others now to do the same, and am eyeing JT myself since we love the desert communities in general and stay in them quite often. During peak season, it's tough just to get a table at the JT Saloon without waiting at least an hour so lots of people, including myself when I getaway there, stock up at the grocery store in YV, and hole up in STRs. The stargazing is amazing and it's not yet so impacted that you lose the feeling of isolation.
To answer your question more specifically, the neighborhood right before the entrance to the park on the Hwy 62 side in JT is Monument Valley. Property values here are the highest but you want to be careful about where in Monument Valley you buy because depending on where, you will have trouble getting in and out during busy times at the park. But aside from that, Monument Valley is great! You can walk to the park and into town. You might not get that same feeling of isolation that you might get north of the highway because even with the acreage, it is more populated but because you're on acreage, you still get the separation.
I'd love to hear your thoughts!
My family owns a property in the Indio area that they use for Short Term Rentals and second home. They made most of their income for Coachella and Stagecoach concerts. They also got decent income from the Polo season and tennis tournament. From the last two years of helping them manage it, its hard to make a decent return on your investment. You wont make much just by renting out on the weekends, you need to rent during the week as well. The market is saturated with vacation rentals in the desert area. Your vacation rental would have to pop to clients on Airbnb or VRBO since their is competition. Also with the whole COVID, there may not be concerts for awhile, so that is lost income. I would wait a year or two and perhaps get a great deal next year when some of these owners choose to off load their investments. I tell my clients to always buy multi family, cant go wrong with units.
You need @John D.. He is the expert on that area around here!
@Charles Cooper Are your clients buying Multi-Family for STR?
@John D. I would love to hear your thoughts too.
They still want a second home with STR potential, so they are going to 1031 into a property in Temecula. More things to do and closer drive from LA.
@Jason Kudo I love JTree and have been there quite a few times, it's an easy trip from San Diego. I've stayed in Yucca Valley, 29 palms, & Joshua Tree. And Joshua Tree is the best IMO. I've been looking at properties in Joshua Tree proper, that are south of the 62. There's a handful of STR's that I follow that are crushing it in that area on Airbnb. I'll hopefully close on a deal there within the next 12 months. The biggest issues I've heard are finding good contractors to help with renovations, & deciding if it's feasible to run a STR from San Diego. What are your thoughts?
While there is still lots of opportunity and money to be made, the question is how much of a hit do we take over the next year or two with the Festivals, events, tournaments, conferences, etc. cancelled or scaled down. It's been a bit of a roller coaster as we were banned from renting due to COVID and making nothing or renting on 30+ day contracts until not that long ago, and now the rentals in the area are *packed* at higher then average rates with people just out of lockdown and looking to escape the cities. And while things are jamming now with people looking to escape the cities, the lack of festivals/events/attractions/conferences/gatherings will certainly take a bite out of the business over the next year or two, until this pandemic has less impact on how we congregate in groups.
I've been working full-time with vacation rentals in the desert here for a number of years now so happy to try to help answer any specific questions, sometimes it's hard to describe the market landscape with broad strokes.....there's a huge number of options from a small condo in Palm Springs to a huge multi-acre estate in Coachella and many strategies inbetween that can all work. Layer on top of that what worked in a world of Festivals and Events pre-COVID will not perform the same moving forward, and it's an interesting discussion to say the least!
@Charles Cooper STR potential in Temecula?
https://myvalleynews.com/temecula-imposes-1000-per-day-fine-on-short-term-rentals/
@Dave Rendo great question about running an STR from out of town such as San Diego. I'd say the first thing to running a successful STR in JT is the look. JT has a specific vibe and your place should match that vibe in order to stand out. I'm sure you're already doing so but I'll say anyway to pay careful attention to the details in the properties you follow that are crushing it there. Next, it depends on what channels you are going to use to get your place booked. If using AirBnB, you must know that they have new (temporary?) protocols in place that require sanitization in between each stay or a mandatory 72 hour wait period in between stays if choosing to opt out of the sanitization protocol with the 72 hours spent on cleaning. They have created a clear delineation between cleaning and sanitizing. If you're going to handle all the booking yourself, how are you going to have the place cleaned and sanitized? With the current climate, many guests are going to be sketched out if you don't have your own sanitizing protocol in place so either way it's probably best to do so. If the idea is to travel to your property as little as possible, obviously you will need someone on the ground to be your eyes and the first place to look would be your cleaning/sanitizing crew since they will be the first-responders in-between stays. Do you have trusted cleaning crew?
Regarding finding reliable general contractors, as an agent, I'm guessing you know the general reputation of GCs. A good one is hard to find and even if you find a good one, how long will they be a good one? You have to keep them busy or they will move on so they can stay busy. Most likely, the ones that work in JT will be based in Yucca Valley or 29 Palms. If you have a good one you work with in San Diego, it's worth asking that person about JT. I found a general inspector, roofer, electrician, and a septic guy that have been reliable so far and have received recs for a couple GCs but have not worked with any so I am unable to say anything about them yet. Electrician specific, stay away from Home Team Electric!
These are my thoughts and would love to hear yours!
@John D. within the city limits it’s illegal now, but not outside in Wine Country.
@John D. Thanks a lot to you and everyone for their input. I'd like to stay in Socal but im all over the country looking for the best Short Term Rental COC, CAP Rate, and NOI. As for Palm Springs, besides brokers/agents, how do you recommend finding deals in the area? Im looking for a minimum 20% COC return in the city of Palm Springs with a 20% down payment of no more than 250K. Thanks again
@David G. Aside from brokers/agents, you can try calling the property management companies to see if they have any clients looking to offload properties. Some property management companies own rentals too so they may have some in their cache that they are looking to liquidate too.
Hope this helps and would love to hear any ideas that have crossed your mind or path as well.
@David G. any updates to this thread? I'm interested in purchasing a short-term rental investment property in this area.
@David G. any updates to this thread? I'm interested in purchasing a short-term rental investment property in this area.
Message me. I have 2 properties I own in the area that are current STR's. Happy to chat about the pro/con. I might be selling one of them because its gone up in value so much, but haven't decided yet. Bottom line is they are cash flowing and doing well.
Great thread, thanks everyone for the insight.
I have been looking for a couple of months now at making my first-ever real estate investment in a Palm Springs STR. Prices have spiked so much that the numbers are tough to work out. I'm looking at mostly 10-19% CoC return *at list price*, and most of these properties are getting multiples and going over. This could still work for me as we'd like to have a second home there that we can spend time at, but to run this like a proper business including cash reserves for 6 months opex on top of the 20% down payment is a pretty large initial capital investment.
Has anyone bought a STR property in Palm Springs recently (last year) and had success with it?
I also noticed that Bermuda Dunes allows STR and prices are lower, has anyone attempted that?
We're also considering buying a much cheaper property somewhere that doesnt allow STR, and instead doing a monthly or "seasonal" rental, which still allows us to enjoy the property part-time. Has anyone succeeded at this? Thanks in advance!
Great thread, thanks everyone for the insight.
I have been looking for a couple of months now at making my first-ever real estate investment in a Palm Springs STR. Prices have spiked so much that the numbers are tough to work out. I'm looking at mostly 10-19% CoC return *at list price*, and most of these properties are getting multiples and going over. This could still work for me as we'd like to have a second home there that we can spend time at, but to run this like a proper business including cash reserves for 6 months opex on top of the 20% down payment is a pretty large initial capital investment.
Has anyone bought a STR property in Palm Springs recently (last year) and had success with it?
I also noticed that Bermuda Dunes allows STR and prices are lower, has anyone attempted that?
We're also considering buying a much cheaper property somewhere that doesnt allow STR, and instead doing a monthly or "seasonal" rental, which still allows us to enjoy the property part-time. Has anyone succeeded at this? Thanks in advance!
Hi,
This is such a great thread! I’ve been vacationing in PS for years & love it. Also in unique JT strs. A couple of my friends moved there permanently so I started looking for strs since I cannot move there permanently yet.
The Hoas & lease land seem like a no go as well as any condos. Haven’t found a condo yet that allows strs. PS sfrs are pretty astronomical at the moment so I started looking towards Desert Hot Springs, it still seems doable there but I’m not as familiar with the area. JT is getting ridiculously expensive and you gotta have something incredibly unique to compete.
Couple of Q’s for the experienced:
Is it even possible to get a PS, PD, La Quinta, Rancho mirage str??
Thoughts on Desert Hot Springs? Indio? Yucca valley?
Im only looking at places that have a pool/spool/spa since my intuition tells me they would do best & my family would be able to enjoy it as a vacation home in the off season (I love desert heat!)
Thanks in advance for any advice for my newbie self :)