Due to the location’s popularity, many investors want to buy a house in Palm Springs.
Table of Contents
- Real Estate Market: State-Level and City-Level
- Why is Palm Springs a Great Place to Live
- Why is Palm Springs a Great Place to Visit
- Short Term Rental Regulations of Palm Springs
- Best Time to Buy a House in Palm Springs
- Best Place to Buy a House in Palm Springs Area
- The Bottom Line
However, with the relatively high initial investment cost, many wonder if it truly is worth the risk. It is true that with its thriving local community and frequent tourist arrivals, Palm Springs offers real estate investors a potentially lucrative investment.
Nonetheless, investors still need to carefully conduct a real estate analysis. Like any investment, getting the data and numbers will ensure investors that they are getting the best deal in a promising location. Keep reading to find out if you should buy a house in Palm Springs California in 2022.
Real Estate Market: State-Level and City-Level
Before getting into anything, it’s important to understand the current real estate market in California and Palm Springs. With both state-level and city-level trends affecting your possible investment, both need to be taken into consideration.
California Real Estate Market 2022
The value of the California real estate market continued to exponentially grow throughout the past few years, and 2022 is no exception. Based on year-over-year trends and projections, most counties, if not all, are expected to further grow, with percentages reaching double-digits. It means that any investor will be hard-pressed to find a location that is a buyer’s market during the initial purchase of their investment property.
While your initial investment is set to be quite steep as a buyer, the Californian real estate market may still be worth the price tag. Though houses in the state are expensive, they are almost always sure to rise in value each year. With the promise of appreciation partnered with great rental value potential and relatively low loan rates, investing in California may not be as intimidating as it seems.
Based on Mashvisor’s data, here are the current real estate market statistics for the state of California:
- Number of Listings for Sale: 22,778
- Median Property Price: $1,135,754
- Average Price per Square Foot: $916
- Days on Market: 59
- Number of Traditional Listings: 69,562
- Monthly Traditional Rental Income: $3,397
- Traditional Cash on Cash Return: 1.76%
- Traditional Cap Rate: 1.79%
- Price To Rent Ratio: 28
- Number of Airbnb Listings: 59,976
- Monthly Airbnb Rental Income: $4,890
- Airbnb Cash on Cash Return: 2.84%
- Airbnb Cap Rate: 2.88%
- Airbnb Daily Rate: $267
- Airbnb Occupancy Rate: 62%
- Walk Score: 50
Palm Springs Real Estate Market 2022
With Californian real estate investments, wanting to buy a house in Palm Springs seems to be a trend among investors and homebuyers. The city’s always been a popular tourist attraction both in and out of state. However, ever since the onset of the pandemic and the rise of work from home, many have been considering relocating to the city permanently.
While Palm Springs is not a cheap place to invest in, per square foot, it is cheaper than the state average. Due to the potential for larger properties, many people consider making the move. With more people looking for places to live and the already high tourism rate of the area, 2022 may be the best year to buy a house in Palm Springs
Based on Mashvisor’s data, here are the current real estate market statistics for the state of California:
- Number of Listings for Sale: 205
- Median Property Price: $1,185,184
- Average Price per Square Foot: $509
- Days on Market: 50
- Number of Traditional Listings: 134
- Monthly Traditional Rental Income: $3,497
- Traditional Cash on Cash Return: 12.37%
- Traditional Cap Rate: 2.41%
- Price To Rent Ratio: 28
- Number of Airbnb Listings: 640
- Monthly Airbnb Rental Income: $5,079
- Airbnb Cash on Cash Return: 2.74%
- Airbnb Cap Rate: 2.78%
- Airbnb Daily Rate: $367
- Airbnb Occupancy Rate: 64%
- Walk Score: 59
Why is Palm Springs a Great Place to Live
With the projected influx of new residents in Palm Springs, you may be wondering what is so great about the area. While many people see it as a vacation destination, locals and residents will argue that it’s better than living in busier cities in the state. Listed below are some of the common reasons why someone would want to live and buy a house in Palm Springs:
1. Price and Space
As mentioned earlier, properties in Palm Springs are cheaper by the square foot. Houses in the city are quite expensive, with the average just over $1,000,000. However, you are bound to get at least double the amount of space compared to the state average.
It is the main selling point for people planning to relocate to the area. With the pandemic forcing people to stay home, many see the benefit of owning a larger home that is relatively far from the metropolitan areas. As Palm Springs offers a lot more space for a similar price, many are drawn to purchasing or at the very least renting a home in the area.
2. Amenities and Convenience
When people think of living in Palm Springs, the first drawback they may think about is the lack of amenities that busier cities offer. However, with Palm Springs, there is no need to be concerned about that. While not the busiest city and definitely offering a more laid-back culture, Palm Springs offers all the major amenities that make busier cities convenient to live in.
Most areas in Palm Springs are within walking or biking distance. Groceries and other stores are also scattered along the area, making it quite easy to get anything you may need. With all of the amenities and convenience of a metropolitan city without the hassle of actually living in a busy city, Palm Springs should definitely be on everyone’s real estate radar.
3. Public Assistance
Another thing about living in Palm Springs is its healthcare system. If you buy a house in Palm Springs, chances are people will rent out your home just to avail of the area’s healthcare and public assistance. On the healthcare cost scale, California averages a 92 score out of 100. Palm Springs, on the other hand, registers a slightly lower rate of 88. While the difference is not drastic, people do consider it significant enough when managing their finances.
4. Great Weather
It should come as no surprise, but you can’t discount the role weather plays in making Palm Springs such a great place to live. While many love winter, escaping the bitter cold is high on everyone’s list. For those people who love the sun and summer, Palm Springs offers year-round tropical weather to be enjoyed. While it may get hot at times, every day is the perfect time to enjoy the natural landscape and the ocean to cool off. Overall, Palm springs offer predictable and warm weather all year round.
With all of the above things drawing people to Palm Springs, the city may be the best place to buy rental property as an investor. While many people would like to buy a home, not everyone is ready to make such a major financial investment. To capitalize on the situation, investors should consider buying investment properties in Palm Springs as a traditional or long-term rental.
As seen on Mashvisor’s data, traditional listings are quite scarce compared to short-term rentals in the city. It is why as an investor, you should buy a house in Palm Springs with the intent of listing it as a traditional rental. With more people permanently relocating and the minimal traditional rentals, you can potentially charge more for your property due to high demand.
Why is Palm Springs a Great Place to Visit
While permanently relocating to Palm Springs is definitely on the rise, its reputation as a tourist hotspot is not going anywhere. With its world-class beaches and consistently warm weather, you can expect travelers and tourists to flock to the city year-round. Here are some of the main attractions that draw tourists to the area and, in turn, boost the short-term rental market of Palm Springs:
1. Beaches and Other Nature Activities
As mentioned earlier, Palm Springs is home to world-class beaches that are perfect for any getaway. However, what most people forget to note are the other multiple landscapes and nature activities that can be found in Palm Springs. From swimming at the beach to hiking and camping in the mountains, Palm Springs is an outdoor haven.
2. Easily Accessible
When it comes to a tourist-friendly place, a key consideration is how accessible it is from other places in the country. It is what makes Palms Springs very popular as a tourist spot. No matter where you are based, you can easily access the area by bus, train, or plane, depending on your preference.
Additionally, the main landmarks in the city are accessible by foot or by bike. It makes it easier for tourists to get around without the need for a car or public transportation. With easy access to the city itself and its main attractions, travelers and tourists continue to visit Palm Springs for vacation.
3. Golfers’ Paradise
Though quite a niche attraction, Palm Springs has been known to draw both novice and world-class golfers. With their premium golf courses having the beach and mountains as a backdrop, golfers from all over the country regularly visit the city. Whether it be for only 9 holes or the full 18 holes, the city’s golf courses are bound to bring in short-term visitors to the area and your rental property.
4. Festivals and Concerts
Festivals and concerts always draw big crowds and tourists to the area of Palm Springs. With popular festivals like Coachella each year, thousands of people line up to see their favorite artists and enjoy the Palm Springs landscape. During this time, short-term rental properties are always booked out and can charge a higher nightly rate. With this, festival and concert seasons offer investors a higher return on investment from their Palm Springs investment property.
Due to its high tourist rates every month, investors who plan to buy a house in Palm Springs should seriously consider renting it out as an Airbnb. Though the monthly rental income may not be as stable, they do have the potential of providing higher returns in the long term. Though there are quite a bit of short-term rentals already available, with the high demand for Airbnb, your property is sure to still gain a lot of traffic.
Short Term Rental Regulations of Palm Springs
Before you can buy house in Palm Springs as an Airbnb, you need to know the rules and regulations of the city on short-term rentals. The rules for Airbnb and short-term rentals are different for each in California. From simply getting a registration to not being allowed to rent out a non-primary residence, the rules will affect how you run your Airbnb. Here are the general rules on short-term rentals for Palm Springs:
1. Short-Term Rental Point Person
Many of those who invest in Palm Springs’s short-term real estate do not live within the city. It is why the city requires an individual over the age of 25 to be the point person for your vacation rental. The point person will be required to sign documents, inform guests of the city’s rules and regulations, and get a signed good neighbor brochure document.
If you do live within the city, the tasks will fall under your responsibilities.
2. Registrations and Licenses
To legally rent out your property, Palm Springs city requires you to obtain a vacation rental or homeshare registration certificate. A vacation rental registration covers all short-term rentals that do not have the owner residing on the premises. On the other hand, homeshare resignations allow certain rooms to be rented while the owner resides on the property as their primary residence. The certificate will allow you to rent out your property to a guest for up to 28 days per guest.
3. Advertisement Regulations
In your registration certificate, a unique registration number will be included. The number must be shown on all your listings and advertisements to ensure that you are in accordance with city guidelines. If you do not show your registration number on your ads and listings, your short-term rental license and registration may be revoked.
Aside from the regular taxes that come with owning a home like HOA and other property taxes, the city of Palm Springs charges additional property costs. When owning a vacation rental in Palm Springs, you will need to pay the Transient Occupancy Tax and Tourism Business Improvement District Tax. The Transient Occupancy Tax is based on your monthly earnings and must be paid each month. On the other hand, the TBID Tax charges a 1% tax on short-term stays.
5. Safety Guidelines
While your property may not be used as a traditional home, it still needs to follow HOA safety guidelines. Before you can operate as an Airbnb or short-term rental, you will need to undergo a safety inspection to ensure your property is in accordance with all the rules. If your property or house is in a complex, please refer to their specific rules and regulations.
Best Time to Buy a House in Palm Springs
If you are thinking of buying a house in Palm Springs, 2022 is a great time to invest in its real estate market. However, while buying property this year is a good idea, there is a certain timing to getting the best deal. Depending on your strategy, you should either buy a property in Palm Springs during the months of April, May, or December.
If you are looking for houses at the lowest possible price, April is the month for you to buy. According to trends, this month usually sees an 11.5% decrease in median sale prices around Palm Springs. On the other hand, May often sees the most number of new listings throughout the year. It means that you will have multiple options and may have more room to negotiate. Lastly, if you can wait until the end of the year to start your investment, lenders and banks offer the lowest mortgage rates around December.
Best Place to Buy a House in Palm Springs Area
Palm Springs is home to five different districts, while Greater Palm Springs comprises nine. Due to such fact, it can be quite difficult to decide where a good place to buy a house is in Palm Springs. It is why savvy and seasoned investors make the most of the real estate tools and apps available to them. As one of the most reliable real estate apps, Mashvisor is currently a crowd favorite among real estate investors.
With Mashvisor’s multiple tools and features that can provide investors with the best real estate analysis, it’s no surprise that many investors continue to use the app. Here’s how Mashvisor’s investment tools can help you choose the best place to buy investment properties in Palm Springs:
The first step to any lucrative investment is finding a property for sale. With Mashvisor’s Property Finder features, you can find the perfect investment properties in just a few clicks. It features a location map and several filters to narrow down your search to exactly what you are looking for. With the Property Finder tool, you can easily save time and only really consider properties that meet each and every criterion.
Real Estate Analytics and Comps
Perhaps, one of the most sought-after features of Mashvisor is its real estate analytics and comps calculations. Once properties begin to pique your interest, you can easily see their potential performance in the real estate rental market. From the property’s estimated cap rate to its cash on cash return, Mashvisor can easily analyze any property for potential investors.
Additionally, Mashvisor can also help you narrow down your options through its real estate comps. Using the real estate comps feature, investors will be able to compare the properties on their shortlist to each other and similar properties in the area. From their occupancy rates to the walk scores, Mashvisor can easily help you pinpoint which place is the best property to invest in.
Rental Income Calculator
Mashvisor also works as a rental income calculator. It is quite crucial to find the best place to buy an investment property in Palm Springs. While you may find a property below market price in a great area, you will need to calculate a number of costs. It will ensure that the rent you are charging covers all the costs of maintaining and owning the property.
Mashvisor includes a feature that allows investors to account for their mortgage, HOA dues, tax, repair costs, etc. After tallying all the said costs, Mashvisor will give you an estimate of how much rent you need to charge to cover them while still making a profit. If the rental price estimate is too high, the cost of investing and owning the property may not be worth it. However, if the rental price estimate is within a reasonable range, it’s a good indicator that you should invest in the area.
The Bottom Line
If you want to buy a house in Palm Springs as an investment, 2022 is a great time to do so. With the positive projections regarding both the California and Palm Springs real estate markets, investors are bound to find a potentially lucrative deal. Due to the influx of people relocating to Palm Springs and the consistent wave of tourists, Palms Springs is an investors’ haven for both traditional and short-term rental properties this year. The only question now is how to find the best rental property investment.
With all the options available, using Mashvisor to narrow down your options that meet your exact needs is ideal. With the Property Finder, you are sure to find the best property for your real estate strategy, whether long-term or short-term rentals, in a matter of minutes. Alongside Mashvisor’s other investment tools like its real estate comps and rental income calculator, there is no reason for your Palm Springs investment to not be a lucrative one.
Sign up and access Mashvisor’s tools today.