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Mike G.
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Palm Springs Vacation Rental Management

Mike G.
Posted Feb 18 2020, 09:13

I am closing this week on my first property, which I will use for short term rentals in Palm Springs. I have done pretty extensive research on what to expect with city regulations and have used a lot of online tools to project returns. But I haven't been able to find much conversation in forums about owners' experience with property management companies. Does anyone have any advice on which property management company to use in Palm Springs?

- The property already has a housekeeper, pool maintenance guy, gardener and handyman who know the home. Is it really worth paying a 25%+ fee for things like marketing, guest checkins and noise control? I live in NY and want the property to run on autopilot as much as possible, so peace of mind is important to me.

- It's a large 4 bed/4bath home on a golf course with a pool in one of the best neighborhoods, so I also want to protect my investment and make sure that it isn't being used for huge parties. Will a smaller boutique management company offer more value, or will I end just up dealing with more issues remotely?

Thank you in advance for any insights. 

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    Replied Mar 10 2020, 07:09

    @Adam Gilbert

    Wow that was all incredibly helpful! Thank you so much for the response! 

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    TJ Watson
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    • SD x LV
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    TJ Watson
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    Replied Mar 10 2020, 12:54

    @Josh Quinn, What @Adam Gilbert wrote is pretty spot on. It's probably worth a call to pick his brain. My current PS agent has disappeared a bit on me, I may have to do the same!

    Regarding the many various rental restrictions in PS, scroll up page 1 to my detailed response, as there are many restrictions, especially depending on SFH vs. condo and how often you can nightly rent them, permits, taxes, etc. I can PM you the town ordinance contact if you want to reach out to him directly, but I pretty much asked him every question possible and posted most of the relevant notes above. I would echo Adam that a $500k budget, while may sound big in some parts of the US, is below median for CA. Especially for a rockin' SFH in PS that needs no work. I'd probably push to $600-700k and per some of what Mike G has alluded to in his notes, often in high-end locales like PS, while scary, the more expensive homes can be easier to rent. Do your homework, interview a few PM's, and do the math. Also agree that the $150 for gardening and pool is about right. PM's are running 25-35%.

    Lastly in the current environment we are in (speaking mostly to the outrage by many towns / NIMBY neighbors hating on airbnb's), I think there is inherent risk in every single town that things could change on a dime. You have to do your homework and assess your own risk against the answers. PS has largely gone through it, they consider themselves the toughest town in the US for this, so not sure how it could get worse. It would crush the tourism market if they outlawed it completely IMO. Not nearly enough hotels in town to support tourism if you had no STR market.

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    Adam Gilbert
    • Realtor
    • Palm Springs, CA
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    Adam Gilbert
    • Realtor
    • Palm Springs, CA
    Replied Mar 10 2020, 18:06

    @Josh Quinn @TJ Watson is also spot on. I am very in tune with the political landscape in Palm Springs, and watch every council meeting, and there is currently no will to end VR's any time soon although it is always something to be mindful of. The 600-700k range gets you a finished product that is all done and will rent very well. It is your best bang for your buck and will give you a great ROI, even better than when you move over a million unless you go for a higher bedroom count but that puts you into a new category under the ordinance. There are a few other factors that you want to be aware of that makes a great rental: bedroom separation, bedroom to bathroom ratio and location, how the backyard is set up, proximity and noise concerns with neighbors, etc. that are all property specific. Again don't hesitate to reach out for more info.

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    Collin H.
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    Collin H.
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    Replied Mar 10 2020, 18:13

    What sort of annual rents would a typical Palm Springs house at $700K generate?

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    John D.
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    John D.
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    Replied Mar 10 2020, 18:48

    @Adam Gilbert is the man and is helping me on all of my projects in the greater Palm Springs area.  A $700k property might generate $90k-$140k in gross annual rents if it's near turn-key and in a nicer neighborhood.  The bigger of a rehab you take on, and the riskier of a property you buy, the higher the rents but the larger the risk and the longer it takes to be rent-ready.

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    TJ Watson
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    TJ Watson
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    Replied Mar 10 2020, 23:13

    Thanks @Adam Gilbert, I think we should talk. Please PM me your info so we can chat offline before the week ends.

    @Collin H. most of what I am seeing gets pretty close to either the 1% or 10% rules, meaning a $700k house should generate $7k a month or $70k a year in gross revenue, or greater. 

    If Adam can find me a $700k prop like @John D. describes, I am ready to go tomorrow! :)

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    John D.
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    John D.
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    Replied Mar 10 2020, 23:35

    @TJ Watson No problem finding a 2%+ rule property if you are willing to take on a project, and take on some risk, and are OK with putting in the money for a remodel and delaying earning for a number of months as the improvements are made.  A property I was watching listed at $345k just went pending, with $40k or so in straightforward upgrades it should do about $90k a year best guess, if well executed and managed.

    It will be hard to cashflow with a property that only does 10% of the purchase+rehab price in gross rents per year (i.e. $60k gross annual rents on a $600k property).  I think the 1% rule is better applied to long-term rentals, and even there doesn't necessarily indicate cashflow.  I have found that the principle and interest payment on the mortgage on a vacation rental only represents 25% or so of the total amount of expenses.

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    Lewis Anderson
    • Real Estate Agent
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    Lewis Anderson
    • Real Estate Agent
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    Replied Mar 11 2020, 06:26

    We talking about FL or CA?

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    John D.
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    John D.
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    Replied Mar 12 2020, 23:05

    @Lewis Anderson If we are talking about purchase price, rehab costs, and operating costs, both.  I've found both markets in vacation rental areas have similar financial models for SFRs.

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    Pablo Flores
    • Rental Property Investor
    • Palm Springs, CA
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    Pablo Flores
    • Rental Property Investor
    • Palm Springs, CA
    Replied Mar 4 2021, 08:28

    @Mike G.

    Congrats on the purchase Mike!! I own and self-manage a few properties in Indio and La Quinta that all gross around 125k. The demand is even higher in PS with a smaller supply because of all the rental restrictions so I can’t imagine a large 4 bed/ 4 bath grossing any less than that, or even less than 150k.

    Either way I think hiring a PM for you was the right move, given that you live out of state and all the restrictions PS has. I live an hour and a half away from Coachella and it’s still difficult for me. Ive spent the last year optimizing all my systems to make the business self sustaining but even then I can’t imagine self managing from another state. I do recommend in the future maybe hiring a local person and paying them maybe 10 % to be the local contact person and handle any in person issues instead of paying an all inclusive PM 25%. A lot of the other tasks a PM does you can build out yourself with a good dynamic pricing software, third party management software, and building out a good house manual to mitigate any issues or questions a guest might have.

    Just curious how much did you pay for your investment?

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    Replied Mar 4 2021, 09:57

    I'm in a similar position to @Mike G.  I'm about to close on a 4/2 in Palm Springs but live in the Bay Area.  Finding a property manager who won't charge too much is proving trickier than I thought.  

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    John D.
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    John D.
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    Replied Mar 4 2021, 22:54

    Doing property management well, especially at scale, is hard.  It's also not a particularly fun business to run.  If you can piece it together with a local team that's a good way to go.  Finding an inexpensive professional full service property management company seems unlikely.

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    Jay Bell
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    Jay Bell
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    Replied Mar 13 2021, 23:03

    @Christopher Grant Casa Aurora by any chance?

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    Sonya Pasamonte
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    Sonya Pasamonte
    • Manhattan Beach, CA
    Replied Jul 31 2021, 17:40

    Hi Mike,

    We are currently looking at the Palm Springs area for a STR SFH and this thread is very insightful. Curious how your STR property is doing one year later? What would you have done differntly knowing what you know now? Did you end up using a property management company and is it worth it? Look forward to your update :)

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    Melissa Nash
    • Rental Property Investor
    • Orange County, CA
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    Melissa Nash
    • Rental Property Investor
    • Orange County, CA
    Replied Sep 9 2021, 16:46

    This is an interesting thread. I own 2 properties in PS area. 1 is a high end resort like midcentury that I have a PM for. They take 30% but I felt like I had to hire them bc of the 3 strike rule there. If you get 3 complaints about ANYTHING, garbage can left out, music in the back yard, basically anything they SHUT you down forever and the 3 strikes goes on your house, not just you. So now you only re-sell to owner occupied. Also they require that you turn in the lists of every guest name and all their info to the city, in person check in, etc etc. So, the question is that we need someone on the ground no matter what. Where is that person to hire? I have called numerous companies and they all want min 20% to do this. The cleaning is easy to find, the handyman, pool etc. that is the easy part. The hard part is the onsite person to meet each guest, that is what we are paying for in PS. My other property is outside city limits and doing awesome, no required in person onsite check in and I have that managed myself with ZERO issues. I have great systems in place so it is easy and automated. Oh and by the way--- you can't buy a $700k property and expect more than $80k year in bookings, that is crazy maybe pre-covid or something. 

    The popular mid century rentals out there are about 1 mil right now and book around $70-85k a year. 

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    Michael Skinner
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    Michael Skinner
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    Replied Nov 26 2021, 20:08

    Interesting to hear everyone's different perspectives about the value PMs provide ("schedulers") to hands-off investors. 

    @TJ Watson did a great job breaking down some of the legislation in one of the strictest cities for STRs. One point I didn't see, however, is the contract limitations. Since STR operators are only allowed 36 contracts per year, the revenue strategy is completely different in this market. You can't just fill the calendar as much as possible like other markets. Maximum revenue is achieved by executing these 36 reservations with sound strategy, something an automated dynamic pricing tool will not help you with (at least right now).

    @Adam Gilbert sounds pretty tuned into market considerations and property specs. With the contract limitations, each property has a kind of revenue 'ceiling' so it's helpful to know how to get the most bang for your buck before buying. @Melissa Nash, for added reference, our 700k 3/2 managed homes in Northern PS are doing 90-110k after TOT is paid (post-covid).

    Believe Collin nailed it on the head, though: PMs aren't worth it until they make it worth it (when they put more money in your pocket AND give you back your time). 

    @Mike G. - curious how this is going for you? What % did you end up paying, and is/was it worth it? 

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    Replied May 19 2022, 11:10

    @Michael Skinner Very good points. I was also wondering how the 36 check in's affect these numbers and if a pricing tool would keep this in mind. I realize this is an older thread... any new insight on this?

    Are you using a PM you would recommend?

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    Michael Skinner
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    Michael Skinner
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    Replied May 20 2022, 09:10

    @Tammy Skeath - Currently, I haven't found a pricing tool that has logic for "booking value", which is the key metric that drives our revenue management strategy. They might get there if more markets start to implement this kind of limitation through STR regulations but I don't anticipate it being a top priority for the software companies.


    As for PMs, depends on what you're looking for in a company; for example local manager will offer a different kind of experience than a national manager... but of course there are tradeoffs with each. I started self-managing my own STR and then took on another and another until I ended up starting a management company because people kept asking for help with theirs. I'd be happy to give you pointers and best practices if you're looking to self manage but otherwise feel free to DM if you want to know what to look for in a good pm and how to go about searching, interviewing, and selecting one that's a good fit for you :)