The Palm Springs real estate market is hotter than ever and quickly becoming one of the best places to buy rental property in California. It’s one of nine cities that make up the Coachella Valley, and it’s one of California’s most underrated rental markets. The answer to, “is Palm Springs real estate a good investment?” is a resounding yes!
But all real estate investors can agree on one thing – purchasing a California investment property is expensive. But that isn’t as true in Palm Springs. Compared to larger west coast markets like Sacramento and Las Vegas, Palm Springs is a relatively affordable place for California investors.
Real estate investors have a lot of reasons to branch into the Palm Springs submarket, so let’s look at five reasons why investors should consider this California resort city.
1. Despite rent and home price increases, Palm Springs is affordable.
California is one of the most expensive states in the country when it comes to purchasing real estate. It isn’t uncommon for homes in markets like Los Angeles and San Francisco to sell for well over seven figures. That’s why Palm Springs is appealing.
Not only is it cheaper for investors to purchase property in Palm Springs, but it’s also cheaper for renters to live in California’s Golf Capital of the World.
The average rent for an apartment in Palm Springs is $1,743 a month. Nearly 60% of Palm Springs renters pay between $1,501 and $2,000 a month, and renter-occupied households account for 57% of the population.
Many people see Palm Springs as a vacation destination, but locals, residents, and even investors have found the hidden value in the city. At the onset of the pandemic, many California residents traded in urban dwellings in places like Los Angeles for larger properties in low-key cities like Palm Springs.
The potential for larger properties, affordable housing, and the growing popularity of Palm Springs has many investors considering the area. With more people looking for places to live and the high tourism appeal of the area, 2022 may be the best year to buy a house in Palm Springs.
2. The Palm Springs real estate market is thriving.
The Coachella Valley’s housing market is moving full steam ahead and shows few signs of slowing down. The valley was gaining steam before the pandemic. During the pandemic though, people left their densely populated cities to work and learn in safer, wide-open places like the California desert communities.
The pandemic created a second wave of buyers, and the activity has been fast and furious since then. It’s also created unprecedented effects on the local economy. According to data from Market Watch LLC, revenue from home sales has doubled over the past two years.
While Palm Springs isn’t the cheapest place to invest, Mashvisor data shows that Palm Springs property is cheaper than the state average and significantly cheaper than markets like Los Angeles and San Francisco.
That’s why Palm Springs is appealing. With a median property price of $660,000, buying your Palm Springs investment property is feasible.
Palm Springs has always been a go-to for investing in rental properties. Low property prices and stunning-year-round climate make the city appealing to investors looking to purchase rental properties or short-term rentals.
3. Jobs are making a comeback.
Palm Springs successfully navigated the pandemic and positioned itself to make a brilliant post-pandemic comeback in 2022.
At the height of the pandemic (May 2020), Palm Springs’ unemployment rate reached nearly 20%. By October 2020, it had dropped to 8.6%, and by March 2022, Palm Springs’ unemployment rate fell to 3.2%–lower than pre-pandemic levels.
Data from a report released by the UC Riverside School of Business’ Center for Economic Forecasting shows that business activity in the Inland Empire expanded by 6.4% in Q4 2021 compared to 4.5% in Q3 2021. The short-term outlook for the Inland Empire remains positive, with local business activity forecast to rise between 3% and 3.5% in 2022.
4. Palm Springs is a resort city.
Palm Springs has been a popular resort city for many years, known for its natural hot springs, hotels, restaurants, and golf courses. It’s been a favorite destination for Hollywood stars since the 1930s, and many celebrities maintain homes in the area.
The city draws tourists year-round. Until recently, many Palm Springs hotels, restaurants, and attractions closed during the hot summer months.
Now, Palm Springs and the nearby communities are home to year-round residents as well as snowbirds and second homeowners. Palm Springs properties are now hotter than ever, with investors considering purchases of real estate properties in the desert city for rental and vacation homes purposes.
5. Palm Springs has a large Airbnb market.
The California real estate market is always a great location when considering a new short-term rental investment as an Airbnb or a vacation rental.
Palm Springs is one of the most popular attractions in the state. Since its economy thrives on tourism, it’s no surprise that many investors consider Palm Springs one of the best cities for Airbnb investment.
The Airbnb occupancy rate is 64%, a high percentage in the vacation rental market. This means that a Palm Springs Airbnb will be highly desired and be booked more than half of the month, creating cash-flow for the investor.
Palm Springs’s cap rate is 2.78%, a solid market value. This means investors’ Airbnb property will be desirable in the California housing market.
These numbers are encouraging for investors considering short-term rental properties in Palm Springs. This area can be profitable as tourists are looking to visit California year-round. The warm weather and the luxurious atmosphere of Palm Springs will keep a short-term rental occupied throughout the year.
Conclusion: What This Means for Investors
Palm Springs has become the city to watch in the Coachella Valley. The market is growing, and investors are taking advantage of the numerous investment options available.
With the area’s rapid growth, investors need to move quickly with rental property loans. It’s important to have the right lending partner in place to capitalize on the industry’s most competitive rates and terms.
When investors work with Lima One Capital, they have access to a robust suite of products. Our clients have different investment strategies, so we have designed our loan options to allow us to cater to their individualized needs.
From private lending to rental property loans, to investment property loans in California, Lima One is here to help.
As experienced lenders in the private lending space, we’re able to move quickly when you find the right opportunity, while providing you with the best options for those looking at California real estate investing. Contact us today to discuss your next deal, or if you have a deal in hand, speed up the process by applying now.