Feedback on buying STR in either Big Bear Lake or Palm Desert?

Question

I'm looking to buy an investment property to use for STR in either Big Bear Lake or Coachella Valley (Palm Desert, La Quinta, Palm Springs, Indio area).  Looking for feedback on what makes the most sense.  We own vacation homes in Big Bear Lake (Moonridge) and Lake Havasu, but have never been in the STR game as of yet and don't really want anyone staying in our existing vacation homes (cause we have basically moved in with all our stuff and personalized our 2nd homes).  We live in Fountain Valley in Orange County.  I would love to buy a property in the OC to STR, but prices are just too insane.  I was also looking at Joshua Tree or Yucca Valley as prices seem to be more reasonable in those areas (although creeping up) and I have heard the area is up and coming, but I have never been out there before.  Do that many people visit Joshua Tree to support a good STRs business?  We have never gotten any kind of cashflow from our properties, but I have a real interest/passion for real estate and think I would really enjoy doing this.  We may now start looking at a seasonal rental for our Lake Havasu place....rent to snowbirds from Canada/Minnesota, so that may be our first foray into the world of investment properties.  Is positive cashflow the main goal?  I'm of the mindset that if someone else is paying my mortgage and I break even or say I end up paying some of my own mortgage/HOA during the slow months....that's not the end of the world, right?  So we're now looking to buy a property that my husband and I will strictly use for STR purposes....would you recommend Coachella Valley over Big Bear Lake or vice versa and what are the reasons?

Jason Kudo · Answer

@Ai-Lang Ford

Hi Ai-Lang,

In the low desert, i.e. Coachella, your best bet is a non-HOA governed property in Bermuda Dunes.

Aside from that, Indio has some STR-friendly HOAs and a few STR-friendly non-HOA neighborhoods as well.

Palm Desert is clamping down on STRs so I would stay away from there.

Palm Springs has implemented a cap on yearly bookings allowed so be careful there.

Big Bear is ok for an STR. The vacation rental market is more stabilized in Big Bear so you won’t see large spikes in occupancy rate or nightly rate where as in the high desert, the vacation market is much younger and has more room for growth.

In the high desert, with the right setup, properties are generating $10k/mo during the slow season which peaks in August. These are properties with pools, hot tubs, A/C, wifi, and land.

Feel free to reach out for further clarification.

Peter Mckernan · Answer

@Ai-Lang Ford sounds like you are looking in the right places for property to do STRs and have a great process to start to cashflow off of them. The areas you mentioned above for STRs are wildly different in many ways.

1. Palm Desert, Palm Springs, Coachella Valley as a whole have really cracked down on properties as STRs so you should really do your due diligence on these areas prior to going into them. Some cities have even stopped the ability to buy and perform a STR all together.

2. Big Bear is a great place to have a STR; however, they have shifted and the council has still been back and forth on a moratorium for STRs in Big Bear and Big Bear Lake. They are talking about putting a hold on all STRs; however, cannot come to a full decision for the STRs yet.

3. The JT, Yucca Valley, Landers and 29 Palms areas are great to have a STR, the market is pretty saturated, so the more unique the property is and the better that it is furnished, laid out etc. will provide the experience even better. The county has increased fines for people that have not permitted their STRs in those areas yet; however, you still have the ability to buy and get those into STR condition while getting the permit. 29 Palms is a city that has different rules and they have a meeting in August to see what their decision will be for short term rentals and if they will cap them, or put a stop to them. Just the other day there were permits filed with the city and the inspector came to do an inspection for a STR he had 25 that day; which was the highest he had for that area ever since he had worked there in the past 10 years. Keep an eye on that city.

Connor Cushman · Answer

I'd say look at the southeast. My family and I have properties in Georgia, Tennessee, and Florida and the cashflow is excellent in all 3 markets. I live and operate as an agent for investors in North Georgia (Blue Ridge) and am seeing it get more and more competitive here because of how desirable it is.

Andrew Shelton · Answer

@Jason Kudo What is considered the high desert?

Jason Kudo · Answer

High desert: Morongo Valley, Yucca Valley, Joshua Tree, Pioneertown, Johnson Valley, Twentynine Palms, Wonder Valley

Low desert: Palm Springs, Cathedral City, Rancho Mirage, Palm Desert, Indio, Bermuda Dunes, La Quinta, Coachella

In general right now, the short-term rental regulations are more strict in the low desert than in the high desert.

Carlos Ortega · Answer

All the cities/towns outside the Coachella Valley that are at higher attitude but still in the desert ex: Yucca Valley, Joshua Tree, 29 Palms, Johnson Valley.

John D. · Answer

Our homes in the area are packed during the summer.  Families come, with the kids off from school, even if its 120 degrees, so long as you have a pool.

Ai-Lang Ford · Answer

Hi Melissa,

We pulled the trigger on purchasing a condo in Palm Desert back in Sep 2021 - it's at a country club that allows STRs, so we have been doing a combination of STR and seasonal rentals since Nov.  We closed in Sep and after we got it ready by the Nov timeframe, it's been doing really well...it's basically been booked from Nov all the way through April.  My question is...how dead is AirBnB and seasonal rentals in the summer months?  Wondering if we should expect any activity at our place or will it just sit empty along with the thousand other Palm Desert condos out there?  We don't rent out our Big Bear Lake home....but may pick your brain if we decide to do that in the future.  Thanks.

Melissa Nash · Answer

I own STRs in mountains and desert. Pro's and cons to both and I like them both. I live in OC too...feel free to connect, happy to discuss more. I bought 2 more this year and cashflow is just fine in both locations.

Nathan Moulton · Answer

La Quinta actually recently implemented an indefinite moratorium on new rental permits unless you’re in one of a handful of communities that are zoned for STR and also allow STR’s. It’s a pretty short list of the current communities that allow it in La Quinta. Outside of those communities existing permit holders are grandfathered in, but you cannot transfer the permit to a new owner if you sell the property.

Feedback on buying STR in either Big Bear Lake or Palm Desert?

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