Are you considering investing in Airbnb Palm Springs? Palm Springs, California is known as one of the most popular attractions in the state. Since its economy thrives on the tourism industry, it’s no wonder why many investors consider Palm Springs one of the best cities for Airbnb investment. And thanks to the online short-term rental site, starting a vacation rental business here has gotten easier than ever. In spite of that (or maybe because of it), the city had passed an ordinance restricting vacation rentals.
The City of Palm Springs actually has one of the most restrictive sets of Airbnb regulations. These regulations have been in place since 2008 and continue to be part of the ordinance in 2020. Palm Springs Airbnb rules apply to both owner-occupied rentals as well as non-owner occupied rentals. Meaning, if you’re a real estate investor, you must pay attention to these rules before buying an investment property for the sole purpose of renting it out on Airbnb. The followings are the core requirements for investing in Airbnb Palm Springs.
1) Vacation Rental Definition
Before we get into Palm Springs Airbnb laws, let’s first establish the difference between an Airbnb vacation rental VS a home-share according to the city. The city of Palm Springs defines a vacation rental as a property (single-family home or condominium) that is rented for 28 consecutive days or less when the owner is not present. On the other hand, a home-share is a type of short-term rental when the owner of the property is present during each guest stay.
Palm Springs vacation rentals and home-shares both ancillary and secondary uses of residential property, hence, they’re only permitted in single-family and multi-family zones. According to the City Council, limiting and regulating Palm Springs Airbnb rentals is going to safeguard, preserve, and protect residential housing stock in the city.
2) Registration & Permit Required
Palm Springs vacation rentals and home-shares must have a valid permit that is renewed annually. Operating a short-term rental without a Vacation Rental Registration Certificate is prohibited. Not registering and operating without a permit is an extremely serious violation in the Palm Springs real estate market 2020. Doing so in now punishable by a $5000 fine and permanent ineligibility to ever be issued a short-term rental permit. Moreover, business entities are not allowed to acquire or renew vacation rental permits.
Additionally, real estate investors of short-term rentals can only be issued and can only maintain one registration certificate at any given time. Meaning, you can’t own more than one Airbnb Palm Springs investment property. Moreover, Airbnb Palm Springs hosts must clearly display their current registration certificate in the unit and on all advertising related to the rental including web-based advertising, host platforms, and print media. Doing so will assist the city in identifying unregistered vacation rentals.
3) Transient Occupancy Tax Collected
The owner of a vacation rental or a home-share property in the Palm Springs area must also have a Transient Occupancy Tax permit. You must also collect, report, and remit TOT to the city of Palm Springs on a monthly basis even if there was no Airbnb guest activity or payment received in that period. The Transient Occupancy Tax rate in Palm Springs in 11.5%.
4) Operational Requirements & Conditions
Owners of Airbnb Palm Springs must ensure that the rental property complies with all applicable codes regarding fire, building and safety, health and safety, and all other relevant laws. Moreover, the VRCD (Vacation Rental Compliance Department) in Palm Springs will schedule and conduct an annual inspection of the investment property at the time of application or renewal. The property’s owner (or his/her agent) must be present during the inspection. Another condition is that the owner must carry a short-term rental insurance policy or a personal liability policy during the term of the registration certificate with a minimum limit of $500,000 per occurrence. You’ll be required to provide evidence of insurance at the time of application or renewal.
5) Airbnb Occupancy Limits
The Palm Springs vacation rental ordinance sets limits on occupancy, parking, and the number of guests stays. In terms of occupancy limits on a Palm Springs rental property, they depend on the number of bedrooms in the rental unit as seen in the table:
|Number of bedrooms||Total Overnight Occupants||Total Daytime Occupants|
As for parking limits, no more than one car per bedroom is allowed for each vacation rental. And as for guest stays for Airbnb Palm Springs vacation rentals, no more than 32 guests are allowed per the calendar year. Additional 4 stays may occur during July, August, and September for a total of 36 guests per year. But, this is prohibited for the first year a vacation rental registration certificate is in effect. Home-shares, unlike vacation rentals, has no restrictions on the number of days a guest may stay.
6) Contract Required
Before any guests stay, the property owner or Airbnb property manager must enter into a signed contract. There’s a variety of requirements for what the contracts must specify. First off, the guest must provide his/her name, age, address, and a copy of government-issued identification. The terms and conditions of the contract must include occupancy limits, parking requirements, and noise prohibitions. Airbnb Palm Springs hosts must provide a copy of the “Good Neighbor Brochure” to the occupant. In addition, the guest must provide a list of guest names, vehicles, and acknowledge that he/she is legally responsible for compliance of all occupants of the rental.
7) Additional Airbnb Palm Springs Rules
- The minimum age for responsible renter: The Airbnb guest signing a vacation rental contract must be at least 25 years of age (this was raised from the original age of 18)
- Local response contact required: All Palm Springs investment properties must have a local contact who is available 24 hours/day to respond within minutes to any complaint or issue at the property
- Tenant eviction ban: No person (including the property owner and manager) can evict a tenant or terminate a lease for the purpose of converting an apartment into a vacation rental
- Violation rules: Any person who violates the ordinance is subject to criminal sanctions as well as administrative penalties. Three citations for violations of the ordinance in any 12 month period will result in a 2-year suspension of the property’s permit.
Check Palm Springs’ 22-Pages long vacation rental ordinance for more details here.
Is Airbnb Palm Springs a Profitable Investment?
Now that we’ve covered the most important rules for investing in Palm Springs real estate short-term rental pretties, you might be wondering if investing here is even worth it. To answer this, we must take a look at Airbnb data and analytics that show how Palm Springs short-term rentals are performing in 2020. You can get this type of data right here on Mashvisor. Our data comes directly from Airbnb.com and reflect the performance of actual Airbnb listings over the last 12 month. So, you can rest assured that our Airbnb analytics is accurate and reliable. Here’s what Airbnb Palm Springs, CA looks like in 2020 according to our Airbnb profit calculator:
- Median Property Price: $494,642
- Price Per Square Feet: $301
- Airbnb Occupancy Rate: 63.7%
- Average Airbnb Daily Rate: $396
- Monthly Airbnb Rental Income: $4,603
- Airbnb Cash on Cash Return: 5.3%
Based on these estimates, you can see that there are many benefits to investing in Airbnb Palm Springs regardless of the aforementioned regulations. First, the median property price for Palm Springs houses for sale is significantly below the California median price of $761,542. Next, the Airbnb occupancy rate here is pretty high, which explains why the average daily rate is high as well. Also, the Palm Springs Airbnb rental income is almost double the traditional rental income ($2,472). And finally, Airbnb cash on cash return is also higher than the traditional one (2.2%). All of this tells investors that renting out on Airbnb is the optimal rental strategy in Palm Springs.
What’s the Next Step for Investors?
If you’re considering to buy Airbnb Palm Springs rental properties, make sure to understand and comply with all the laws and rules in the city’s vacation rental ordinance. If you believe investing here is a smart idea, make use of Mashvisor’s real estate investment tools to find the best Palm Springs investment properties. You can use the Real Estate Heatmap to see which neighborhoods are best for Airbnb investing. Our Property Finder makes finding homes for sale much easier and our Airbnb Profit Calculator allows you to analyze any Palm Springs rental property you find using data and predictive analytics. So what are you waiting for?
Start your 7-day free trial with Mashvisor now to find and analyze the best Airbnb investment properties in Palm Springs, California!