To quickly introduced myself, I'm from Belgium where I already own a few appartment buildings.
Next month, my cousin is going to move to San Diego in order to start a new life. In order to help him, we have raised (along with some friends) between $175k and $200k to invest in real estate. The idea would be to buy a house for short rental (AirBnb or longer period).
Our first idea was to invest in Las Vegas, NV. However, because of the current legislation and the distance from San Diego, we have second thoughts. Therefore we started to look in Palm Springs, Ca.
My first question would be: do you have any recommendation regarding those two cities? Or any other area close by?
Secondly, we will be at least seven investors bringing each $25k. Therefore we were thinking about creating a real estate company through which we would buy the property. However, I have no knowledge of the rules in America and what is recommended. Can someone help me out in this regards?
Lastly, we would like to raise additional money? I think if we bring $175k, we should be able to obtain a ~$400k loan. Is there any bank or other corporation that we need to go through to obtain a loan?
Thank you very much for all your help.
Los Vegas is a boom or bust town that currently is in a boom period. Its appreciation rate has been near the top in the country the last couple of years. However, in the Great Recession (GR) it busted hard. This is because it is largely tourist based and in recessionary times, one of the first things cut is discretionary travel. So the great appreciation is to balance the huge depreciation experienced during the GR. Vegas, even though very hot in the summer, does not have a big drop in the summer because people come for the shows, glitz, gambling.
Palm Springs is also touristy with the town being much more desirable in the non-summer months. Any rental is likely to be harder to rent in the summer months. I am less knowledgeable about their current appreciation or what occurred in the GR. I was at Palm Springs a month ago to go up the mountain. It was my first time there in 2 years. It was significantly more crowded than 2 years previous. More parking lots, more security, and more people. It was shocking.
I’m from Palm Springs and it’s a great city for vacation rentals. The city is growing, with lots of new restaurants, festivals, etc which provide great returns for vacation rentals.
With a budget of 400k-450k there are only two areas where you can find properties in Palm Springs where they are move in ready for vacation rentals. Unless, you buy a condo(200-300k) which I do not recommend because they all have HOAs and are very strict with their rental policies.
Let me know if I can help in anyway or if you have any questions.
Hi @Gregory Kawa just wanted to warn you about the new legislations in Palm Springs which can prevent short term rentals in near future. If that happens, property prices may decrease because everyone would want to sell their STR properties. But you can look surrounding cities Indio, La Quinta, Palm Desert etc. Actually I can refer a realtor to you who knows the area very well. She closes a deal almost every week. Even just talking to her would give you a good idea about where and how to invest. Her name is Ahu, you can find the contact details in the link below. You can just give her my name and she would help you as much as she can.
I wish you the best with your investing.
Hello @Gregory Kawa and welcome to the BP community. I’m a realtor in the Palm Springs market. I think it is an important acknowledgement that their was a recent vote to targeting short term rental investments. However, the vote was decisively against it (over 68%). So we still have the short term rental investment green light here and I personally don’t expect it to change in the near future.
Let me know if I can help you in any way.
There are some great numbers in the cities surrounding Palm Springs, if you find the right property. With that said, the desert cities are changing their vacation rental rules often, so plan on spending some time talking with local experts and understanding not only what rules each City has now, but what changes are likely in the future. If you're cousin will be living in SD, purchasing a home in the Coachella Valley area as a second home (from a mortgage perspective) will enable you to put less down, and get a slightly lower interest rate. With 10% down you could probably find a larger home on a larger lot for $800k ($80k down) and plan on spending another $100k in renovations and furnishing. The right property with a price tag just under $1mil including renovations can do $250k-$300k in gross rents per year. If anyone wants to chat about the ordinances in various desert cities, or how much a property might gross in rent, feel free to reach out. I own large homes in Indio, La Quinta, Bermuda Dunes, and Palm Desert as vacation rentals, and we also do property management for a few homes we don't own in the area.
Thank you all for your answers. It is very helpful. We'll be visiting Palm Springs and its area on Thursday and Friday and try to find a house.
I will remember to contact you