Is Joshua Tree and Palm Spring’s lucrative STR market downgrading?

Question

I’ve been focusing Joshua Tree and Palm Springs. In Joshua Tree, I’m looking for that unique instagramable property out of the subdivision. But, now noticing there seems to be an exodus happening. Are people find the returns as not what they expected? I know that there was some market saturation during 2020-22 and that the market is cooling so there may be good deals to be had. But, is it still worth it and is the situation with all the National Parks affecting Joshua Tree National Park? Meaning, are there less travelers to the park?

Palm Springs: due to regulations and higher prices, is Palm Springs no longer a viable option?

Thanks!

Palm Springs: due to regulations and higher prices, is Palm Springs no longer a viable option?

Thanks!

Collin Hays · Answer

Heather, great post. Part of what you are seeing is that the shine of owning a vacation rental is wearing thin. Three years ago, interest in this investment class was peak, and everyone was talking about it.

Reality is setting in that, like any other active investment, vacation rentals require some work. The investor hopefully gets rewarded by scratching out an above-average return, but "scratching out" is the part that many investors are figuring out they don't have the time and interest in.

The investment flavors of the day right now seem to be chasing the latest AI stock or buying gold.  But real estate is still legit, and vacation rentals can still be an excellent investment. Don't let what others are doing necessarily discourage or distract you.

Jon Martin · Answer

Palm Springs has high entry prices and tough regulations.

JT is less regulated and not as expensive but not cheap either, especially if you need to add a bunch of amenities in order to compete and be "instagramable". Still a viable market that won't go anywhere because of the sheer numbers of people within a few hours but you have to bring your A game and bring the capital to match.

John Underwood · Answer

I have heard Joshua Tree is severely saturated and I would tread lightly in the area.

There may be some opportunities as people are selling who are hemiriging money.

James Carlson · Answer

There's always a market for a great product.

If you can create a unique experience, people will come. (My client's A-frame outside of Colorado Springs is an example.) And @Jon Martin is right; there will always be demand for that place b/c of its proximity to population centers (L.A., San Diego, etc.)

All that said ... yeah, the market is tough. From what I see, the imbalance with saturation has started to correct itself, but it's still tough. So, you might need to hold for a few years (while others drop out of the STR game) before you start to see your numbers really go up. Whether that's something you want to do or not is a personal choice.

Michael Baum · Answer

STRs in general are getting tougher as time goes on. JT has been an "it" place for a little while but profits get thinner as prices go up.

You end up competing against folks who have had their STR for 10 years and paid much less for their places so they can keep their nightly rates more reasonable.

Jon Martin · Answer

If you buy in at the right price then you can better hedge your risk. By now there should more price stability than there was 1-2 years ago, so if the numbers work it can still be viable. Look for 20% revenue to price ratio and properties with unique characteristics like views, boulders, pools, proximity to cool stuff etc. Avoid the boring 3/2 in a residential neighborhood.

Heather Fultz · Answer

These are all great replies and great advice. So, what I’m getting from all of this, is buying is still a viable option out here, but profits may take a while and if it’s managed right I can still see some profits. I’m thinking I’ll take advantage of the down market, get a good deal, have a great pm company manage it in the beginning to get the marketing and reviews out there, then take it over myself. I know there are still some great returns to be had there if it’s done right. It is still in a national park, so demand will always be there and people are selling, so hoping it’s better for me! Also, for insurance, it seems the like it would work, no fires, stay out of flood zone.

Andrew Street · Answer

Hi Heather - I’ve noticed the shift too. A few years ago, everyone was diving into these markets expecting easy returns. Now, some are realizing it takes more effort than expected, and the numbers aren’t always as strong with all the competition.

Palm Springs is feeling tighter with the rules and pricing, and Joshua Tree’s not the hidden gem it once was - but there’s still opportunity if you’re realistic and patient.

Markets change, but the fundamentals still matter. Happy to connect if you want to chat more!

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