Amit,
I would advise you not to invest in PS if this is purely an investment decision. The city recently reduced the number of allowed bookings in a calendar year to I believe 20. Before it was 32 + 4 during the summer. Even if you do 5 night minimums this will still give you less than a 30% occupancy for the year which will really hurt your CoC return. If this purchase is more of a second home/vacation property for your family that will make some money on the side, then I get buying in Palm Springs. I currently manage a multi million dollar home in Palm Springs that has its own gated entrance and sits on a hill. Because of its seclusion, we can get away with circumventing the city regulations as code enforcement has no way to verify how much the property gets booked. Most of the bookings we get for this property are also through our website, so the city cant verify through Airbnb or VRBO how many bookings we are getting. However, the owner of this home did not purchase it with the intention to be an investment home and its seclusion allows us to do significantly more than 32 bookings per year. For your average PS home, this would not be possible. And if you happen to buy something like this where you can get away with doing more than 32 bookings per year, then the asking price will likely be very high and will erode your CoC returns looking at it purely from an investment perspective.
My recommendation would be to looks elsewhere in Indio, Coachella or Bermuda Dunes. You can absolutely still kill it with a STR in the Coachella Valley, and in my opinion the returns you get here are unmatched compared to anything you can get elsewhere in the country. The caveat is that the market has gotten so saturated that your property REALLY needs to stand out and the upfront cost you need to get started is much higher than anywhere else in the country. I just closed on a 6 bedroom/ 5 bath home in Indio with a huge empty lot where I am going to build a resort style pool in the backyard. My upfront costs with 25% down, pool building costs, renovations, furnishings will run me about 425k out of pocket. But gross income will be about 250k-275k per year.
To answer your last question, self management is possible but most people have no idea how difficult it is to self manage a truly successful STR with 60-70% occupancy. Again this largely depends on what type of STR you have. I manage 20+ high end STRs in the Greater Palm Springs market. Our average daily rate(ADR) is high for our STRs, and we provide many amenities to cater to a more luxury clientele, but because of that guests have very high expectations when they book. Most investors would not be able to self manage a successful STR like this from afar. This has been part of the problem last few years; the market has became saturated with first time investors buying your average 4 bed 2 bath home thinking they are going to kill it self managing, only to realize the returns are no where near what they anticipated and the work needed to self manage is more than they thought it would be. So my advice: understand your market and local regulations, avoid the average cookie cutter STR home, make your home STAND OUT and be aware of the significant upfront cost needed to do so, and absolutely hire a local PM company. Good luck Amit!
Pablo
Helios Vacation Rentals
