STR - Big bear lake vs Palm Spring vs Lake Arrowhead

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STR - Big bear lake vs Palm Spring vs Lake Arrowhead

Nadia O.
Member since 2020 · 82 posts · 100 votes

We have been thinking of purchasing a property either on Palm Spring, Big Bear Lake (Moonridge), or Lake Arrowhead.

Big bear lake seems to be our #1 choice since the city is more friendly towards STR. The homes in moonridge have increased significantly. Not sure what's going on there. but there have been multiple bidding wars going on in snatching almost every property lisitngs within the hour. We don't want to overspend money since our mainly interest is to gain high ROI. so we are cooling off the search for now.

Lake arrowhead is beautiful. However without lake rights, is it even worth it purchasing there? this will be our first purchase strictly for STR so we want to make sure the ROI will be the highest.

I'm aware that Palm Springs have many restrictions towards STR. plus many residents seem to want to ban STR. should we even consider the area then? any suggestions of other surrounding areas that we should even consider?

I used to own an airbnb rental in Orange County until the city pretty much shuts down all of us.


Hope to hear some of your feedbacks. thanks
 

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JJ P.
Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
5y

I can speak to Big Bear. We owned and visited Big Bear for many years, decades actually. We were in BBC, close to the airport and some restaurants, etc. There are many, many small cabins in that area that serve as vacation homes and STR. From BBC, Baldwin Lake or Moonridge, you can walk to the forest but not the ski slopes or downtown. Big Bear has always been a tourist area. Peak season is winter, but lack of snow can have a big negative draw on tourism, as people think skiing when they see the snowcapped peaks from home in downtown LA. There was something like 100% occupancy over Thanksgiving and the Christmas/New Year holiday, and, back then, a lot of vacancies in between.

 Year round rentals don't have much demand and there's not a lot of employment unless you go "down the hill" for work.  That's a 2-3 hour r/t commute, so most people don't do it.   What's left are B & C type long term renters overall.  Retirees buy there, tourists visit there, people own long term 2nd homes there,  and a LOT of marginal people escape there.  

If you're hands off, I'd say branch out to a place that isn't already overrun with STR and where the restrictions are lax or non-existent. Look for a niche. A nice property that stands out- hopefully due to location and a lovely setting. Decorate it beautifully, perhaps in theme, and stock the kitchen nicely. A little hole in the wall gem with a pretty view and a small town feel might do far better for you than being one of hundreds and a worn out STR welcome from the locals. If I were hooked on the Mt/desert regions of so Cal, I'd look slightly further afield. Joshua Tree, maybe. Pioneertown? Lucerne Valley? Spring Valley Lake on the backside? Pinon Hills up against the mountains? Idywilde? Julian? The old areas of La Quinta? I don't have a feel for these areas currently as STRs, but perhaps one of them might work for you. The price points are better and that will give you a little leeway with your cashflow while you build your business. You are building a business, hopefully with gushing reviews and repeat customers, but it all takes time.

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  • Alex Sabio
    Investor · Fontana, CA · Member since 2017 · 95 posts · 59 votes
    5y

    @TJ Watson good insight. Meeting guest to check in is a deal breaker for me. I live 1.5 hours away. What other markets are you looking into? I’m open to anywhere, I just need to buy 1-2 next year

    1Reply
  • Cory Randle
    Big Bear City, CA · Member since 2017 · 9 posts · 10 votes
    5y
    Originally posted by @Alex Sabio:

    @TJ Watson good insight. Meeting guest to check in is a deal breaker for me. I live 1.5 hours away. What other markets are you looking into? I’m open to anywhere, I just need to buy 1-2 next year

    A few of the housekeeping companies will act as a checkin for you if you want to self manage.  

    1Reply
  • Tiffany Katuls
    Member since 2019 · 4 posts · 4 votes
    5y

    I have to respectfully disagree with people saying you cannot be profitable in those areas. I self manage and have found it very easy (especially in PS) to find crews. They do my in person check-ins (I live too far away). 

    Both cities BB and PS have been fine. PS has a lot of rules yes but it's also hugely profitable so I do not mind. I own all over the country but do prefer PS and desert areas to almost anywhere due to ROI.

    3Reply
  • Tom Kastorff
    Rental Property Investor · Las Vegas, NV · Member since 2014 · 137 posts · 118 votes
    5y

    @Alex Sabio I am mainly responding to the OP's post, it looks like mid-thread you injected your own topic and questions. Highly recommend you start your own thread, to get specific recommendations but also to respect her post. 

    I just purchased a new primary residence, so my investment prop searches have slowed, and I plan to wait out the rest of the year to see how the pandemic plays into more or less inventory. Most desirable locations are too frothy right now because of low rates and bored and hungry investors trying to land a deal. The 2 or 3 locations I am still following lightly are just overpriced compared to likely returns for an STR. That's what I have seen in big bear, too many biggerpockets type investors trying to buy-in, and I just don't see how most of the current price levels can be profitable rentals unless you purely self manage. I am still following one CA ski town that I already own in, otherwise I am going to concentrate out of state going forward.

    0Reply
  • Tom Kastorff
    Rental Property Investor · Las Vegas, NV · Member since 2014 · 137 posts · 118 votes
    5y
    Originally posted by @Tiffany Katuls:

    I have to respectfully disagree with people saying you cannot be profitable in those areas. I self manage and have found it very easy (especially in PS) to find crews. They do my in person check-ins (I live too far away). 

    Both cities BB and PS have been fine. PS has a lot of rules yes but it's also hugely profitable so I do not mind. I own all over the country but do prefer PS and desert areas to almost anywhere due to ROI.

    I was very clear in my posts that you can be profitable if you self manage, but that is tough to do for most people without a big network and trusted team. You don't just show up to a new town and have a trusted team in an hour, it takes time. If you have to use a typical PM with standard 25-35% fees, that is where you walk the fine line of no ROI. Investors just need to do their homework and run numbers, as usual.

    0Reply
  • Nadia O.
    OP
    Member since 2020 · 82 posts · 100 votes
    5y

    @Tom Kastorff i agree with you! PS has so many restrictions that we actually steer away from it. I am, however, looking at surrounding areas such as Cathedral City, Palm Desert, and Indio. Even so, those cities have their own restrictions that make STR harder to operate each year. I have been watching the RE market like a hawk. With the pandemic, it is very risky to purchase one. We are predicting that everything will still shut down till next year. So we are waiting for the right time to purchase. AS for PM, i have my way to operate on my own. I'm not one to blow 20-35% on PM if i can do most of it myself. All i need is to hire 2 cleaners. And perhaps talk to the neighbors if they want extra cash. There are so many ways to bypass PM. I have done STR back in 2014-2016. I did very well on my own. So im not afraid to jump on the wagon by myself.

    Lets talk about big bear. What i've seen, the market has been a huge seller market. There have been crazy bidding wars to obtain any properties within $200-$400k range. I've stopped all search. And you're again correct about negative gross income due to high prices. Majority of STRs make their upcharge money during ski seasons. The new investors that recently bought, i think they are gonna have to hold on. If things don't look good, they're in for a big downturn. It doesn't make any sense to purchase now. Again, hiring a PM with 20-30% cost is stupid to me. 

    As for now, I'm looking at local areas such as Santa Ana, Long beach and surrounding areas. Just like you, I'm waiting till the end of the year to make another purchase

    1Reply
  • Rachel S.
    Investor · Los Angeles, CA · Member since 2019 · 127 posts · 63 votes
    5y
    2Reply
  • Nadia O.
    OP
    Member since 2020 · 82 posts · 100 votes
    5y

    @Rachel S. i agree with you. I think a good property should be able to serve as short & long term rentals in needed. if it caters heavily on one side, it eventually will collapse on its own. RE is a gamble but it doens't have to be if the numbers are right. We all just need to be patient & buy at the right price. Just like stocks, buy when it dips. 

    1Reply
  • Rachel S.
    Investor · Los Angeles, CA · Member since 2019 · 127 posts · 63 votes
    5y
    Originally posted by @Nadia O.:

    @Rachel S. i agree with you. I think a good property should be able to serve as short & long term rentals in needed. if it caters heavily on one side, it eventually will collapse on its own. RE is a gamble but it doens't have to be if the numbers are right. We all just need to be patient & buy at the right price. Just like stocks, buy when it dips. 

     I think there are some areas that make great LTR but have little potential to be STR. I would have no problem investing in those, if the numbers work out. I think a STR investment should always have the potential to turn into a LTR though, for the reasons I stated above.

    0Reply
  • JJ P.
    Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
    5y

    I can speak to Big Bear. We owned and visited Big Bear for many years, decades actually. We were in BBC, close to the airport and some restaurants, etc. There are many, many small cabins in that area that serve as vacation homes and STR. From BBC, Baldwin Lake or Moonridge, you can walk to the forest but not the ski slopes or downtown. Big Bear has always been a tourist area. Peak season is winter, but lack of snow can have a big negative draw on tourism, as people think skiing when they see the snowcapped peaks from home in downtown LA. There was something like 100% occupancy over Thanksgiving and the Christmas/New Year holiday, and, back then, a lot of vacancies in between.

     Year round rentals don't have much demand and there's not a lot of employment unless you go "down the hill" for work.  That's a 2-3 hour r/t commute, so most people don't do it.   What's left are B & C type long term renters overall.  Retirees buy there, tourists visit there, people own long term 2nd homes there,  and a LOT of marginal people escape there.  

    If you're hands off, I'd say branch out to a place that isn't already overrun with STR and where the restrictions are lax or non-existent. Look for a niche. A nice property that stands out- hopefully due to location and a lovely setting. Decorate it beautifully, perhaps in theme, and stock the kitchen nicely. A little hole in the wall gem with a pretty view and a small town feel might do far better for you than being one of hundreds and a worn out STR welcome from the locals. If I were hooked on the Mt/desert regions of so Cal, I'd look slightly further afield. Joshua Tree, maybe. Pioneertown? Lucerne Valley? Spring Valley Lake on the backside? Pinon Hills up against the mountains? Idywilde? Julian? The old areas of La Quinta? I don't have a feel for these areas currently as STRs, but perhaps one of them might work for you. The price points are better and that will give you a little leeway with your cashflow while you build your business. You are building a business, hopefully with gushing reviews and repeat customers, but it all takes time.

    7Reply
  • Hannah Reichert
    Investor · Spokane, WA · Member since 2020 · 49 posts · 15 votes
    5y

    @Nadia O. Following up what JJ said, the high desert (Yucca Valley, Joshua Tree, Pioneertown, is booming as far as STR are concerned). That's my hometown and my family operates a large real estate/PM business out there. That family and many of my friends have many many STR that are doing very well for themselves. It's also doing really well for LTR too as people from LA are flooding the area for both short term and long term reasons. It's right next to JTNP (Joshua Tree National Park) so we get a lot of tourism, including celebrities. Of course, do your own research about area laws regarding STR. We just bought our first LTR and are cashflowing well.

    1Reply
  • Eric R. Dehner
    Rental Property Investor · San Diego, CA · Member since 2017 · 31 posts · 16 votes
    5y

    @Nadia O.

    Had a bud recently but a STR in Joshua Tree. It's already booked for the rest of October. Restrictions seem to be minimal and home prices still reasonable. You had someone comment above who seems to have their finger on the market. Reach out to her! GL

    2Reply
  • Nadia O.
    OP
    Member since 2020 · 82 posts · 100 votes
    5y

    @JJ P. @Hannah Reichert @Eric R. Dehner  I already did a little search on joshua tree RE & you guys are so right on. I don't know why i didn't think about it sooner. I believe area around the joshua national park is hot. i definitely have to do more thorough research to make sure & possibly visiting the area as well. THANK YOU!!!

    2Reply
  • Eric R. Dehner
    Rental Property Investor · San Diego, CA · Member since 2017 · 31 posts · 16 votes
    5y

    @Nadia O.

    A little insiders knowledge. Pioneer town has a bar called red dog saloon. Recently purchased by the high end LA restaurant group who own Bestia. Resident chef is a rockstar, plan is for hearty Mexican fare. Good food usually coincides with the path of progress.

    Plus who doesn’t want to visit pappy and Harriets for a great concert?

    GL

    3Reply
  • JJ P.
    Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
    5y

    Glad to help! My theory on RE somewhat coincides with Warren Buffett's famous advice:  Buy when everyone is selling and sell when everyone is buying.   My RE take on that wise quote is "look to the upcoming neighborhoods."  Big Bear was a vacation rental area LONG before AirBnB was a household name.  My rough guess is that half the houses, maybe more, are not full time,  primary resident homes.  That's a lot of competition for the same vacationers.  Palm Springs, same.   The Rat Pack vacationed there 50 years ago.  

       Also, if you're just starting and hands off, it's crucial to not overextend yourself financially.   If you can get in for $100K less in purchase price, that gives you some leeway to build your business and/or expand.  You'll have some wiggle room.  

     I wish you the best success.   jjp

    2Reply
  • Rachel S.
    Investor · Los Angeles, CA · Member since 2019 · 127 posts · 63 votes
    5y
    Originally posted by @JJ P.:

    I'd look slightly further afield.  Joshua Tree, maybe.  Pioneertown?  Lucerne Valley?  Spring Valley Lake on the backside? Pinon Hills up against the mountains?   Idywilde?  Julian?  The old areas of La Quinta?  

    I wouldn't touch Lucerne Valley if someone *paid* me to take a property. Nothing there to entice people to a STR and the population is marginal for reliable LTR tenants. I have a friend who inherited a couple of properties in Lucerne Valley so I have this info from the horse's mouth. lol

    1Reply
  • Jennifer Sireika
    Property Manager · National · Member since 2020 · 27 posts · 8 votes
    5y

    I am a specialist in Big Bear and Lake Arrowhead. Yes, the competition is stiff. Yes, we require in person face-to-face check ins. Yes, you need someone local to help you manage (PM or an individual). But at the end of the day, demand is at an all time high. Our commission is less than 20% for full service and we have connections (housekeepers, handyman, vendors, contractors, etc) that is worth gold! My advice is to buy in the mountains if you love snow and four seasons, this is not a place to invest and expect high ROI. Those days are gone. But you will make some money, cover your expenses, and own a great vacation rental! The permits are not as scary as people think as long as you do your research first. Good luck!!

    3Reply
  • Michael Encoy
    Rental Property Investor · Monterey, CA · Member since 2019 · 36 posts · 9 votes
    5y

    A bit late to the party here, but I was wondering if you pulled the trigger on BB. I am looking into the same area vs JT. I took a dive into the PS area market for STR and LTR (niche market), but COVID and a restrictions regarding STRs drew me away.

    0Reply
  • Nadia O.
    OP
    Member since 2020 · 82 posts · 100 votes
    5y

    @Michael Encoy i didn't buy yet. Prices are still high. Just like stock market, i only buy on the dip never on the high. The fed might raise interest rate by 2023. if that happens, a crash is coming. not sure in real estate but for sure in stock market. But my gut is telling me, evictions & foreclosures are on the rise. I'll wait till next year to make a move in RE. Definitely no FOMO here

    0Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Michael Encoy I have properties in Big Bear and my ROI is insanely good as are the people we manage for that have just bought places. Someone mentioned it's not a good ROI up here but with good management it most certainly is rents are up more than housing prices this year even with the massive price appreciation. My properties rents are up 63% and we already had top properties in there comp classes and great cashflow. My wife and I have two properties that cashflow more than our yearly cost of living each!

    1Reply
  • JJ P.
    Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
    5y

    I think Real Estate parallels the stock market when it comes to trying to time  the dips and rises.   If properties have gone up 10% a year, as they have been for the past few years, then, if they plummet 25%, you still paid 5% more than 3 years ago.   It's just too hard to predict. 

    They say the best time to buy real estate was 10 years ago, and the next best time to buy is today.   

    2Reply
  • Nadia O.
    OP
    Member since 2020 · 82 posts · 100 votes
    5y


    @JJ P. so did you buy this year?

    0Reply
  • JJ P.
    Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
    5y
    Originally posted by @Nadia O.:


    @JJ P. so did you buy this year?

    Yes, we moved assets from high priced San Diego to the lower priced Oregon Coast, to add a little diversity to our portfolio and finally scratch that "out of state investor" itch.  Plus we landed in an area that we want to spend some time and got a lovely second home for ourselves.   In total,  we bought 4 Single Family, LTRs over the summer of 2020 in a low key (not so much "up and coming") area that offered good dollar for dollar value for us.  They are rented and doing great. You can read about those in the Oregon forums.  

    I understand the trepidation about making a move in an up market. Everything is up, as you know. The Case-Shiller report said some markets, including San Diego, were up 10% in December. It could be a bubble, but who knows?  I think if you do your due diligence, and buy a good property where the numbers make sense, there's no time like the present.   If you wait, you might have better chances, or you might have worse chances.  You'll only know that when the future arrives.  But if you take a chance now, maybe make some money for a while because the numbers work with the data that you have available right now, then in 3 years everything tanks and you take another chance and buy the dip.  Then you took two chances and now you have two houses.  

     In my opinion, the biggest mistake you can make in wealth building is to wait.   Sitting on the sidelines is what keeps people from building wealth. Why?  Because  Time is the magic fairy dust that makes  people rich.   The only houses that I really regret are the ones I didn't buy or the ones I sold instead of keeping.  We turned down several in 2012 because they were a mere $7500 over what we felt was fair market value.  Not all of our houses were home runs, some were duds the day I sold them.   But the duds would have been superstars if I still had them today, with the magic of time, inflation, population growth, etc. 

    My Grandma's first house was a mile from the beach in Hermosa Beach, CA.   It was $16,000.   She didn't want to buy it because it was so expensive.  She almost backed out but Grandpa insisted.   Needless to say, 30 years later that was the best thing she ever did with her money.  

    5Reply
  • Tom Kastorff
    Rental Property Investor · Las Vegas, NV · Member since 2014 · 137 posts · 118 votes
    5y
    Originally posted by @JJ P.:
    Originally posted by @Nadia O.:


    @JJ P. so did you buy this year?

    Yes, we moved assets from high priced San Diego to the lower priced Oregon Coast, to add a little diversity to our portfolio and finally scratch that "out of state investor" itch.  Plus we landed in an area that we want to spend some time and got a lovely second home for ourselves.   In total,  we bought 4 Single Family, LTRs over the summer of 2020 in a low key (not so much "up and coming") area that offered good dollar for dollar value for us.  They are rented and doing great. You can read about those in the Oregon forums.  

    I understand the trepidation about making a move in an up market. Everything is up, as you know. The Case-Shiller report said some markets, including San Diego, were up 10% in December. It could be a bubble, but who knows?  I think if you do your due diligence, and buy a good property where the numbers make sense, there's no time like the present.   If you wait, you might have better chances, or you might have worse chances.  You'll only know that when the future arrives.  But if you take a chance now, maybe make some money for a while because the numbers work with the data that you have available right now, then in 3 years everything tanks and you take another chance and buy the dip.  Then you took two chances and now you have two houses.  

     In my opinion, the biggest mistake you can make in wealth building is to wait.   Sitting on the sidelines is what keeps people from building wealth. Why?  Because  Time is the magic fairy dust that makes  people rich.   The only houses that I really regret are the ones I didn't buy or the ones I sold instead of keeping.  We turned down several in 2012 because they were a mere $7500 over what we felt was fair market value.  Not all of our houses were home runs, some were duds the day I sold them.   But the duds would have been superstars if I still had them today, with the magic of time, inflation, population growth, etc. 

    My Grandma's first house was a mile from the beach in Hermosa Beach, CA.   It was $16,000.   She didn't want to buy it because it was so expensive.  She almost backed out but Grandpa insisted.   Needless to say, 30 years later that was the best thing she ever did with her money.  

    JJ, this is an excellent write up. Well said, well written. Spot on. Paralysis analysis gets us all. Money is hard to part with at times. Just sold my SFH in SD (bay park) and moved to Vegas. Now trying to buy an STR in a number of places, just so competitive and going so far over ask. You really have to hunt for deals and run your numbers hard. One agent I spoke to yesterday up in wine country flat out said "everything up here goes 10-15% over ask" so now do I even make an offer? At ask? Do I just go 10% over? Your mind tells you to give up and wait (as others have written above, to wait out the market) - but then waiting grows no wealth. Cash on the sidelines earns peanuts. It's a balance, just have to be patient and strike when the opportunity is in hand.

    2Reply
  • John D.
    Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
    5y

    @Nadia O. you write "Just like stock market, i only buy on the dip never on the high.".  I wonder if you might reconsider using the analogy.  If your primary way of making money is buying low and reselling for more, perhaps there's some understanding here.  If your primary way of making money is by renting your home for significantly more then your monthly expenses, the properties price is only one factor, and even if the price is historically high that may not prevent you from doing extremely well by generating way more in monthly rent then your monthly expenses.  Would you prefer the opportunity to buy a property for $500k in a market environment where your interest rate on your mortgage is 5%, or the opportunity to buy the same property for $550k in a market environment where the interest rate on your mortgage is 3.5%?  If the primary goal is to generate cashflow from rents, paying more for the same home in a lower interest rate environment looks attractive.

    With most of my vacation rentals, the gross rents are many times the monthly mortgage payment.  If I am confident a property will make a good rental for the long haul, I would have no problem paying over market, and not be too concerned if the local market is at a recent peak.  In situations where properties that make good rentals are very hard to find, and where margins on good rentals are fat, the purchase price can be less important then one might think.

    2Reply
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