Thinking of Buying a Home in Palm Springs for Short-Term Rentals? Here’s Our Top Piece of Advice for Maximizing Your Investment

By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
Nov 5, 2024

If you’re considering purchasing a property in Palm Springs for part-time rental income, one piece of advice could make all the difference: choose a property type that stands out in a crowded market and avoid neighborhoods where STR permits are capped.

Sunset Sands in Palm Springs

Market Insights on Property Types

The Palm Springs short-term rental (STR) market is heavily saturated, particularly with three-bedroom properties. Here’s the current distribution of STR listings by bedroom count as of Q3 2024:

• 36 five-bedroom properties
• 204 four-bedroom properties
• 476 three-bedroom properties
• 363 two-bedroom properties
• 142 one-bedroom properties

With such a high number of three-bedroom STRs, competition is fierce, making it harder for these properties to stand out. To maximize rental income, consider buying a property with five or six bedrooms, or a smaller property with just one or two bedrooms, as these categories are less common, resulting in more stable demand.

Ocotillo in Palm Springs

Navigating the Market: Buyer Advantages and STR Permits

Many homeowners are currently looking to sell, and while pricing has stayed relatively firm, there has been some downward movement, giving buyers plenty of options. If you’re serious about short-term rentals, prioritize neighborhoods below the 20% STR cap, as this allows you to apply and receive a permit in under 45 days.

Neighborhood STR Caps: What to Know Before You Buy

Palm Springs enforces a 20% cap on STRs in each neighborhood, and once a neighborhood exceeds this cap, new applicants must join a waitlist. Here are the current STR percentages by neighborhood:

• Andreas Hills: 3.91%
• Araby Commons: 3.26%
• Araby Cove: 11.69%
• Baristo: 1.78%
• Canyon Corridor: 1.17%
• Canyon Palms: 7.02%
• Deepwell Estates: 12.48%
• Demuth Park: 13.03%
• Desert Highland / Gateway: 5.27%
• Desert Park Estates: 23.66% (Waitlist applies)
• El Dorado Palms: 0.00%
• El Mirador: 21.02% (Waitlist applies)
• El Rancho Vista Estates: 29.46% (Waitlist applies)
• Escena: 0.00% – Month+ only in this HOA
• Four Seasons: 0.00% – Month+ only in this HOA.  Renters must be over 55 years as well (we manage one home in this community)
• Gateway: 0.36%
• Gene Autry: 19.38% – You very well might end up on the waitlist if you buy in this neighborhood 
• Historic Tennis Club: 4.28%
• Indian Canyons: 11.24%
• Lawrence Crossley: 20.00%
• Little Beverly Hills: 16.11%
• Little Tuscany: 14.24%
• Los Compadres: 5.30%
• Melody Ranch: 1.31%
• Midtown: 5.59%
• Movie Colony East: 20.59% (Waitlist applies)
• Oasis del Sol: 10.92%
• Old Las Palmas: 10.29%

Sunsplash in Palm Springs

Month+ Rentals as an Alternative

If the neighborhood you’re considering is above the 20% STR cap, Month+ rentals are a valuable alternative. These rentals typically perform best from October through May, when demand is high, and homeowners can secure extended stays at competitive rates. However, for June through September, when demand drops, Month+ bookings often require rate reductions of 40-60% to stay competitive. Some homeowners choose to “board up” their homes during these slower months, while others lower their rates to maintain occupancy.

To make Month+ rentals legally compliant, hire a California Real Estate Brokerage licensed to manage monthly rentals and ensure they use a California Association of Realtors (CAR) form for every guest. This form is essential to safeguard your rights, preventing tenant claims and squatter issues that could complicate evictions.

La Mirage in Palm Springs

Partner with Local Experts at OpenAiRE Brokerage

Open Air Homes’ sister company, OpenAiRE Brokerage, has a dedicated team of real estate agents specializing in the Greater Palm Springs area. Our local experts are well-versed in the nuances of the short-term rental market and can guide you through every step, from finding the right property type to navigating STR permit regulations and maximizing rental potential. Whether you’re looking for a five-bedroom luxury retreat or a cozy one-bedroom unit, OpenAiRE Brokerage is here to ensure a smooth, informed buying process tailored to your goals.

The Blue Door Bungalow in Palm Spring

Key Takeaways

If you want to succeed in the Palm Springs rental market:

1. Choose a five- or six-bedroom home or one-bedroom unit to avoid the saturated three-bedroom category.
2. Look for neighborhoods below the 20% STR cap to avoid the waitlist and secure an STR permit in under 45 days.
3. Consider Month+ rentals for areas above the cap, especially from October to May, and plan for potential rate reductions during summer months to stay competitive.
4. Find a Real Estate Agent that understands the rules of the road for legally renting your home short term in the Palm Springs community.  Ask them for comps reports for any home you are considering, and they can work directly with us at Open Air Homes to give you a sense of the market to make an informed decision. 

For the latest STR data and neighborhood-specific information, consult the city’s updated PDF. Following these insights will help you make a strategic, well-informed investment in the Palm Springs STR market.