Located in Southern California, Palm Springs is home to over 48,000 residents, making it the 4th largest city in the Coachella Valley. The city has seen a decent amount of population growth over the years. This growth in population is projected to continue, which is a good sign for real estate investors. And with 42% of the residents living in rental properties rather than owning their own home (according to NeighborhoodScout), buying a rental property in the Palm Springs housing market is a great option, especially when it comes to long-term rentals.
Palm Springs enjoys a healthy economy that is mainly founded on the tourism industry. It is a popular tourist destination with a global reputation for first-class resorts and hotels, gourmet restaurants, eclectic shopping, upscale recreational opportunities, and unique architecture. Due to its year-round hot weather and proximity to major cities in California, Palm Springs is also a popular winter getaway and retirement destination, especially for celebrities from Hollywood. The city has been gaining increasing popularity among younger generations, owing to its numerous festivals and international events such as the Palm Springs International Film Festival, and attractions such as the Palm Springs Aerial Tramway, the Living Desert Zoo and Gardens, and the Palm Springs Art Museum. An estimated 14 million tourists visited the Greater Palm Springs area in 2017, contributing more than $5.5 billion to the local economy. The city is, therefore, a great location for investing in short-term rental properties due to its heavy reliance on tourism. Other industries driving local economic growth include healthcare, retail trade, finance, construction, and manufacturing.
The Palm Springs real estate market benefits from robust business conditions. It is one of the two most active markets in the Coachella Valley. The revitalization of Downtown Palm Springs is seen as a catalyst to the city’s momentum: With development comes a better lifestyle, and a better lifestyle draws buyers and renters.
|Facts and Market Trends in Palm Springs|
|Homes For Sale229|
|Traditional Vacancy rate4.70%|
|Airbnb Occupancy Rate65.35%|
|Median Rent Price$3,402|
|Median Days on Market68|
|Price to Rent Ratio18.4|
|Average Cap Rate|
|Average Rental Income|
|Median Household Income$45,497|
|RENTAL STRATEGY||STUDIOS||1 ROOM||2 ROOMS||3 ROOMS||4 ROOMS|
The Palm Springs real estate market has witnessed a strong real estate appreciation in recent years. Since Q1 of 2000, Palm Springs properties have experienced a total appreciation of 146.89% according to NeighborhoodScout, which is an average annual home appreciation rate of 4.81%. Property value is still climbing in the Palm Springs housing market as Zillow reports an appreciation of 5.6% over the past year. This housing market trend is expected to continue, which makes Palm Springs a seller’s market with large opportunities for long-term return on investment.
With its booming tourism industry, Palm Springs has experienced major Airbnb growth over the years. In 2017, a total of 120,000 Airbnb guests stayed at Palm Springs short-term rentals, bringing a total revenue of $29 million to the local Airbnb hosts.
Airbnb is legal in Palm Springs but there are some restrictions set by the city’s short-term rental ordinance. Airbnb Palm Springs hosts can choose to operate either a homeshare - i.e. renting out a bedroom(s) in their home for 28 days or less while residing on-site - or a vacation rental - i.e. renting out a non-owner occupied accommodation for 28 days or less. Occupancy is limited to 2 adult guests overnight and 1 vehicle per bedroom. While homeshares do not have annual limits for guest stays, vacation rentals are limited to 36 guest stays per calendar year.
In order to legally operate a short-term rental, Airbnb Palm Springs hosts must obtain a city-issued Registration Certificate as well as a Transient Occupancy Tax Permit. As part of the operational requirements, the city requires a “responsible person” over the age of 25 to sign a contract with the operator, and the operator is required to personally meet and greet guests at their arrival to explain to them the local rules and regulations, in addition to obtaining a signature of receipt of the Statement of Rules and Regulations, also known as the Good Neighbor Brochure.