Airbnb in Joshua Tree

[Nicole Masters]

Investment Info:

Single-family residence buy & hold investment in Yucca Valley.

Purchase price: $405,000
Cash invested: $40,000

We purchased a home to operate as a STR in Yucca Valley (Joshua Tree area) in September 2021. We have been researching and analyzing the market since February and started actively looking in June. We made 7 offers and eventually landed on this home. It needed cosmetic work and we spent 5 weeks there painting, updating bathrooms, and setting up furnishings. The house is a 3bed/2bath house on half an acre. We are currently in a snag with the permitting & it's currently sitting empty and unrented.

What made you interested in investing in this type of deal?

We love the desert and we wanted to invest in somewhere with great weather that had the option for short term rental and had high appreciation.

How did you find this deal and how did you negotiate it?

We found the deal on market and we offered 5k over asking.

How did you finance this deal?

We used a 10% down vacation home loan.

How did you add value to the deal?

We painted the whole house ourselves (talk about sweat equity), had a 320 foot privacy fence built in the backyard, updated both bathrooms, and swapped out mirrors, lights, and other fixtures to modernize it.

What was the outcome?

There was a 45 day moratorium put on applying for permits 3 weeks into renovations. Currently our house is sitting empty. We have listed it on Airbnb, VRBO, and Furnished Finders for 30+ day stays.

Lessons learned? Challenges?

The permitting issue has been a huge challenge. We've tried pivoting to 30 days but have had no luck in booking our place.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We used a real estate agent and lender.

[Mark Futalan]

@Nicole Masters

Congrats on the house, it's unfortunate about the permit hopefully they open things back up soon. It seems that the city of YV is receptive to STRs. I'm out in La Quinta and they put a permanent moratorium on new STR permits this past summer. I know of many folks who were on the same boat as you out here. Hopefully that's not the case in YV. Would be curious to know what happens!

[Nicole Masters]

@Mark Futalan Hi Mark! Thanks for your kind wishes on the Yucca Valley house, I would love to hear more about your properties in La Quinta!

[Mark Futalan]

@Nicole Masters

Hi Nicole! Thanks for connecting! Yes I own 2 STR's in La Quinta and bought them in 2018/2019 and have been renting them as STR's since then. Both have pools and close to the festivals and tennis gardens. We do really well but unfortunately the city put a permanent stay moratorium on new STR permits. I guess that's a good thing for us in terms of saturation/competition but I do know of many folks that had to convert to 30 day plus rentals because they didn't get their permit in time. I was looking at YV as an STR opportunity for a while and have been following things. Hopefully they do open things up, fingers crossed! Keep us all posted on things!

[Nicole Masters]

@Mark Futalan Those sound like awesome purchases! I know having a pool is a very attractive feature for a STR (we lost out on a 30+ night booking to a house with a pool haha). It is good in a sense for destiny and saturation reasons, but then really difficult for a free market to thrive. Tricky stuff.

There was a town hall meeting last night in YV and they decided NOT to extend the moratorium, which is awesome! But there will still be a complicated series of hoops to jump through.  

[Jayson Cain]

Love how the bedroom turned out and kudos for you guys for putting in sweat equity! Really unfortunate about the permitting situation. Curious if you're also thinking of other exits (selling, cash out refin, etc)? I have some friends that are in the limbo with the permitting process. 

[Mark Futalan]

@Nicole Masters

Thanks! That's good to hear! There are definitely hoops to go through in the STR landscape but if you can find the right opportunity, get the permit and follow the rules set forth in that particular market, you'll be set!

[Nicole Masters]

Originally posted by @Jayson Cain:

Love how the bedroom turned out and kudos for you guys for putting in sweat equity! Really unfortunate about the permitting situation. Curious if you're also thinking of other exits (selling, cash out refin, etc)? I have some friends that are in the limbo with the permitting process. 

Hi Jason, thank you for that! It was a fun property to put time into. Right now we don't have any exit strategies, we would sell if worse comes to worse but right now we're weathering the storm and have a date for January 5th to do an in person application review with the city, so we'll see how it goes from here!

[Eden Karacan]

@Nicole Masters 

Thanks for sharing! Unfortunately about the licensing. You made a great point, let the free market thrive! 

While the permits are being collected/plans being made, it might be a good idea to throw it up as an unfurnished long term rental. They are in HIGH demand in the area, yet there are few properties up for long term rent. And the ones up for rent are primarily being run by rather horrible management companies. Truly ugly properties are easily renting for $1400+, a nice 2/2 easily fetches $2500, but there are such few nice homes up for long term rent. I truly believe you’d be able to ask whatever you like and without too much time a tenant would come along. Heck, if it weren’t for a lease I just signed I’d happily be that tenant! 

I plan to house hack in the JT area by buying my first property there in the next year. My plan is to get a main home with an ADU and live in the ADU while long or short term renting the main home out. The return seems to be a lot higher than in other cities when house hacking. Just my $.02!

Best of luck! 

[Jason Kudo]

Originally posted by @Eden Karacan:

@Nicole Masters 

Thanks for sharing! Unfortunately about the licensing. You made a great point, let the free market thrive! 

While the permits are being collected/plans being made, it might be a good idea to throw it up as an unfurnished long term rental. They are in HIGH demand in the area, yet there are few properties up for long term rent. And the ones up for rent are primarily being run by rather horrible management companies. Truly ugly properties are easily renting for $1400+, a nice 2/2 easily fetches $2500, but there are such few nice homes up for long term rent. I truly believe you’d be able to ask whatever you like and without too much time a tenant would come along. Heck, if it weren’t for a lease I just signed I’d happily be that tenant! 

I plan to house hack in the JT area by buying my first property there in the next year. My plan is to get a main home with an ADU and live in the ADU while long or short term renting the main home out. The return seems to be a lot higher than in other cities when house hacking. Just my $.02!

Best of luck! 

In theory this can be a good idea so you don't bleed money while working towards getting your STR launch date. Keep in mind that California is a very pro-tenant state and if you sign a long-term lease with a client, it may be a nightmare getting them out even after the lease is up and tenants are transitioned to month-to-month especially with eviction moratoriums threatening to strike at a moment's notice. Tenants are more savvy and aware of their rights these days. I advise speaking with a real estate attorney to understand your rights and learn how you can protect yourself if thinking about leasing long-term to help off-set costs before the STR is launched.

[Daniel Cheng]

Hi Nicole,

Thanks for sharing the process, really inspiring!

I'm in the process of buying a vacant lot in Yucca Valley and building something there for STR, I wonder what's the latest regarding the STR permit?

[Renee Lindgren]

Hi Nicole,

How is your property doing now? We have a STR in Yucca Valley and I am looking to see how others are doing and brainstorming ideas to either sell it or different rental strategies.