The Definitive Guide to Buying Short-Term Rentals in Greater Palm Springs

By Brad Greiner, CEO of OpenAiRE Brokerage and Open Air Homes

 

So you’ve decided to start shopping for an investment property in the Greater Palm Springs area. To help you start your search, we have compiled a comprehensive set of regulations and facts to consider when choosing between the 9 distinct cities (plus Joshua Tree).

 

There’s a lot of information to dig into here, and as short-term rental real estate experts, our goal is to help you through the investment home-buying process so that you set yourself up for success within this quickly maturing segment of the hospitality meets real estate industry.

 

If you have questions, you can always reach out to us at hello@openaire.co, or visit our team page to choose one of our agents to work with.

Monetizing Your New Asset

Like most other buyers, you plan to enjoy the desert sun and poolside cocktails when you can, while giving others the opportunity to do the same when you’re away. When thinking about how you’ll monetize your home, concerns about how long guests can stay begin to creep in your mind, intensified by the headache of attempting to understand the ins and outs of the constantly changing legal landscape of the short-term rental industry.

 

OA Real Estate Group recognizes how challenging this process may be, and we wanted to offer our extensive knowledge to help guide you through purchasing a home, while hopefully alleviating some of those stressful concerns. The below content is meant to highlight the pros and cons of buying a home in the desert. Through this blog, we hope you gain a new perspective on best practices when starting your life in the desert.

 

This article was written in March, 2022.  Things do change in the short-term rental industry, so please reach out to any of our agents at OpenAiRE, as things may have changed since this article was written.

Our Ranking by Demand, Regulations, TOT Taxes and Community Support

Below, we rank the top 10 cities of  The Greater Palm Springs Area, also known as the Coachella Valley.  We focus on providing you the short-term rental regulation framework for each, so that you can begin to narrow down your hunt for a home.

 

We’re ranking each city using a combination of factors: demand, regulations, TOT taxes, and community support.

 

Though important, we don’t recommend banking your decision on the regulations implemented in your neighborhood. We believe you should always buy a home in an area you love, one that you can see yourself and your family in for years to come. Our recommendations, therefore, are meant to advise you about the restrictions associated with each area.

 

We partner with Open Air Homes, who specifically specializes in extended stay rentals over 30 days. In most cities, 30+ day stays are considered long term rentals, and with the future of travel aligning with this trend, you can expect to rent your home out for 30-90 day stints throughout Coachella Valley.

 

Lastly, each city levies its own Transient Occupancy Tax (TOT tax). Cities around the world have levied their own TOT tax, similar to what hotels charge when you stay the night. Many cities have now become reliant on the income from these taxes, which often equate to millions of dollars that can visibly be seen as contributing to vibrancy of the community.

 

Palm Springs, for example, has become reliant on these TOT taxes to tackle a number of initiatives, and while we wanted to include the TOT taxes that each city charges guests in your home, we believe that these TOT taxes are the short-term rental industry’s way to contribute to the community.

1. Joshua Tree

 

TOT Tax: 7%

Policies:

• San Bernardino County imposes a 7% Transient Occupancy Tax on amounts paid by guests for occupancies that last 30 or fewer days.
• San Bernadino County requires short-term private rental permits for rental periods of 30 days or less. The county has limitations on occupants and vehicles. The owner must provide a 24-hour phone number for complaint resolution. The property must be in compliance with relevant fire, building, zoning, and health and safety codes.
• You’ll need to apply for a Transient Occupancy Registration Certificate to collect the tax. The county tax office mails a form to every active certificate holder each quarter.
• You’ll also need to apply for a short-term rental permit, which includes paying the $667 filing fee, plus the biennial $401 renewal fee.

 

Ok, ok, Joshua Tree is in San Bernardino, and not in the Coachella Valley. But we believe we’d be doing you a disservice if we didn’t highlight one of the most visited desert landscapes in the nation.

 

Joshua Tree is the youngest community on the list, and has generally been pretty open-minded to the expansion of short-term rentals in the community. With more space and less density, rentals in Joshua Tree are booming beyond just popular, but also coveted vacation spots.

 

In 2022, there have been new proposed vacation rental rules. These include:

 

• Only residential parcels with two acres or more can have multiple rentals
• Occupants must stay for a minimum of two nights
• Businesses are banned from getting STR permits
• Tents and RVs aren’t allowed as vacation rentals
• A maximum of 12 people can occupy a single rental (two guests per bedroom, not counting children under 12)
• Vacation rentals in apartments are still banned, but will be allowed in condos
• Owners must provide a document that reminds renters to respect the peace and privacy of residents

 

Our recommendation: Find a home you love that’s on the outskirts of the town, away from neighbors. Guests venturing to Joshua Tree are most likely wanting a retreat, a little sanctuary if you will, that motivates them to disengage from their hectic lives in the city. With that in mind, they will prefer to stay off the beaten path. Look for properties where nature walks, stargazing, and outdoor experiences can happen without interruption from the outside world. In this case, that means even your Joshua Tree neighbors.

2. Palm Springs

 

TOT Tax: 11.5%

Policies:

 

• Link to restrictions 
• Owners need a business license.
• Owners must complete an application of TOT with a one-time fee of $25.
• Owners must pay a vacation rental new registration fee of $944. Annual renewal fee is also $944.
• Owners can only maintain one vacation rental at any time.
• Owners can’t turn multi-unit dwellings into vacation rentals. The City of Palm Springs only issues short-term vacation rental certificates to single family residences and condominiums.
• After purchasing a home that was once a vacation rental, new owners can’t have the permit transferred. Instead, the previous owner must close their permit and cancel any future bookings, while the new owner must apply as a new applicant.
• Businesses may not apply for a short-term vacation rental certificate.
• Owners must have a short-term rental insurance policy or personal liability policy.
• Owners of an estate home (4 or more bedrooms) must pay a one-time fee of $410 for a land use permit.
• Vacation rentals are limited to 32 guest stays per calendar year, with four additional guest stays during the months of July, August, and September.
• Owners must provide the Good Neighbor Brochure and the City Manager’s Statement of Rules and Regulations and obtain signatures of all guests on the Statement of Rules and
• Owners must also post these regulations inside the vacation rental.
• Owners will only be able to rent out 5 or 6 bedrooms, even if the property has additional bedrooms.
• There should only be two overnight occupants per bedroom.
• Only one car per bedroom is permitted anytime of day.
• There are no restrictions on the number of days a vacation rental property can operate.
• Effective July 1, 2021, vacation rentals must pay the 1% TBID (Tourism Business
• Improvement District) assessment on short-term stays of 27 days or less

 

 

Palm Springs is known for its abundance of mid-century, modern homes, reminiscent of an era that has been preserved throughout the city. Celebrities like Elvis, Frank Sinatra, Sunny & Cher, Marilyn Monroe and many more have vacationed or own a property in the area.

 

Beyond its aesthetic, the city is famous for its art scene, cultural diversity, and vibrant community. Boutique hotels and stand-alone restaurants dominate the landscape, maintaining the close relationships Palm Springs motivates guests and locals to create.

 

For hiking enthusiasts, the Indian and Tahquitz canyons are a must-see, while the Palm Springs Aerial Tramway—taking you to the summit of Mt. San Jancito—will give a breathtaking view of the entire Valley. The city has become a year-round home for city dwellers searching for more space and more outdoor fun.

 

Just a short drive from Palm Springs to the east, you’ll find Cathedral City, home to CVRep (Coachella Valley Repertory) and the new Agua Caliente Casino that has just opened its doors. This city has become a destination for the artist particularly Cathedral Canyon Cove, where you still can find affordably-priced homes tucked away, surrounded by mountains.

 

Our partners at Open Air Homes believe that regulation is positive for the short-term rental community. They’re committed to being good neighbors through implementing policies and marketing practices that cater to longer term, respectful guests.

 

While some think that the Palm Springs regulations make it unattractive, we believe in a future that allows for both short-term rentals, long term rentals and hotels to coexist in neighborhoods. While there are rules and fines when guests break the rules, these regulations have been put in place to keep the peace in the community.

 

Palm Springs is and will always be the quintessential embodiment of California desert living. From the great restaurants to the lively downtown area, we believe that Palm Springs is now and will continue to be one of the best places to start your home owning experience in the desert.

 

Our recommendation: Find a family friendly home that can be marketed towards families looking for extended stays, as opposed to weekend party groups. Think more board games than beer pong tables. As we are seeing a huge uptick in 30-90 day rentals, consider renting out your home for an extended period, which will inevitably reduce the overall wear and tear of the home. But, if you design your home well and price it correctly, you will receive high occupancy rates, regardless of if you do shorter stays or longer stays.

3. La Quinta

 

TOT Tax: 10%

Policies:

• Link to restrictions
• Fees are $110 per property and need business license
• The city of La Quinta is no longer using new STVR permits unless the property is located within an exempt area, effective May 20, 2021.
• STVR permits are valid for one year, and the owner must renew permits on an annual basis.
• Must Proof of ownership.
• Do not need to be under an HOA.
• Anything over 31 days is long-term and you don’t need business license unless you have 3 or more properties that you are renting long term in that area.
• A new owner of a property that was previously a vacation rental may not renew the previous owner’s permit. Instead, they must apply for a new short-term rental permit.
• If an owner adds additional bedrooms to an existing residential dwelling, they must notify the city and update the short-term vacation rental unit’s online registration profile. The city must also approve such bedroom additions to ensure compliance with the city codes.
• The number of bedrooms in a short-term vacation rental that are eligible for listing are limited to 9.
• The local contact person in the short-term vacation rental unit’s online registration profile must be available 24/7 to respond to complaints.
• The owner must provide copies of the Good Neighbor bBochure and place it in a conspicuous location within the short-term rental unit.
• Guesthouses, detached from the primary residential dwelling on the property as long as the owner rents the guesthouse and primary residential dwelling to one party.

 

 

La Quinta is a beautiful city, tucked away in a mountain cove, perfect for hiking and exploring the picturesque desert landscape. Guests love the area for its fantastic food scene and cute downtown area, dotted with boutique stores and galleries. La Quinta even has its own manmade lake with a 4-star hotel on its banks!

 

The city is quieter, and the city council recently paused new permits for short term rentals.  However, Open Air Homes continues to manage homes in the area that are 31+ day rentals, and they’ve been renting well.

 

Our recommendation: The shift in popularity towards extended stays shouldn’t discourage you from considering La Quinta, especially if you plan on occasionally renting out your home.

4. Palm Desert

 

TOT Tax: 11%

Policies:

• Link to restrictions
• Properties renting for 27 days or less need a permit.
• As of November 19, 2020, all new short-term rental permit applications require a written approval letter from an HOA having jurisdiction over the property. Existing short-term rental permits without a written approval letter must terminate and permanently cease operations.
• Since July 1, 2021, short-term rentals are included in the Greater Palm Springs Tourism Business Improvement District. In addition to the city’s 11% TOT, there is a 1% assessment on gross rental revenue of short-term stays.
• Before a guest occupies a short-term rental unit, the owner must meet and greet them on-site. The owner must also obtain the guest’s name, address, and copy of a valid government-issue ID and provide the guest with a copy of the Good Neighbor Brochure.
• Owners must inform the renters about all the city’s rules and requirements for short-term rentals. They also need to provide a round-the-clock contact person who can respond to the property within 30 minutes.

 

 

Palm Desert is known for having great golf courses and less restrictions on short-term rentals.  A number of HOAs, in an effort to be more competitive in a crowded marketplace, also allow short-term rentals.

 

Guests who come to Palm enjoy that the city is centrally located, with some incredible golf courses that only add to the location’s value.

 

Home to El Paseo—considered the Rodeo drive of the desert—and the Living Desert—a beautiful safari like zoo off the 74 highway—this area has unprecedented opportunities for fun in the sun when not in a pool.

 

Our recommendation: Palm Desert’s looser rental regulations make it a great place to consider for shorter stays.

 

5. Rancho Mirage

 

TOT Tax: 10%

Policies:

• Link to restrictions
• In response to rising resident complaints about noise and other concerns, Rancho Mirage began banning short-term rentals (27 days or less) altogether—except gated communities where permitted by HOAs, effective November 20, 2021. Therefore, the new rules prohibit rentals under 27 days. Existing short-term rental permits that expired on January 1, 2021 will automatically be extended to June 30, 2022.
• The ban on short-term rentals applies to all privately–owned residential dwellings in all zones of the city.
• 27 nights or less is considered short-term rental.
• Rental permit and license for $429 annually.
• Short-term rental owners must apply for a TOT license. Short-term rental platforms must collect TOT on behalf of owners.
• Owners must submit monthly tax reports.
• Any property is ok but check CC&R’s for any homes under an HOA – certain HOA’s may restrict short-term rentals.
• Short-term rental platforms such as Airbnb and VRBO must make sure their listings have vacation rental permits.
• Owners must cease operations and notify the city if ownership changes. Owners must also notify the city when they construct or convert new bedrooms.
• Advertisements for short-term rentals must include a permit number,
• As part of the permit application process, county officials must inspect short-term rental properties.
• Short-term rentals may not host events, such as weddings, retreats, or conferences without an event permit.
• Owners must provide a 24-hour phone number for complaints, and must be able to come to the property within an hour to resolve issues.

 

Rancho Mirage unfortunately voted to ban short-term rentals (any stay longer than 27 days) this past year. This ban should be a clear indication that the industry has been allowed to operate for far too long without restrictions. While we believe that with the right restrictions in place that short-term rental neighbors can peacefully coexist with long term neighbors, the city council took some pretty serious measures in restoring some night time quiet. Open Air Homes is committed to being good neighbors and takes every possible step to ensure our guests respect the community they’re in. Read about Open Air Homes’ Good Neighbor Pledge.

 

Our recommendation: We absolutely love Rancho Mirage and believe there are a lot of great homes built by inspiring architects. While the ban on short-term rentals may seem harsh and could lower home prices—as a lot of homeowners relied on the monetization of their home—our partners at Open Air Homes have the 30+ day rentals experience to assist your search if Rancho Mirage is where you want to be.

6. Indio

 

TOT Tax: 13%

Policies:

• Link to restrictions
• Regulations are lenient as long as you apply for a business license and the HOA allows it. You must also obtain a permit, which is valid for 12 months. To ensure the permit remains valid, the, the owner must renew the permit annually.
• Some HOA’s in Indio don’t allow short-term rentals. Otherwise as long as you apply for a business license and renew it, yearly it’s permitted.
• Vacation owners must remit the TBID assessment of 1% to the city of Indio, effective July 1, 2021.
• Before issuing a new permit or a renewal permit, the city of Indio will conduct a building, fire, and health and safety inspection of the short-term rental.
• As part of the permit application process, the city will verify the number of bedrooms in a vacation rental unit.
• A vacation rental application could be denied because the:
  • Owner submitted false information
  • Owner failed to provide a complete application
  • Owner ailed to pay any city taxes, assessments, fines, or penalties related to short-term rentals
  • Short-term rental doesn’t comply with code regarding fire, building, safety, and other relevant laws.
• If an owner obtains a permit for a particular vacation rental, the permit can’t be transferable to another property owner. If change of ownership occurs, the owner must immediately notify the city and cease operation. The new owner must submit an application and an application fee for a new permit before they can rent the property as a short-term rental.
• Overnight occupancy of a short-term rental must not exceed four people, plus no more than two people per bedroom.
• The maximum number of guests at a short-term rental unit can’t exceed 20 people, regardless of the number of rooms.
• Any noise created by a machine, device, or equipment that produces sound outside the rental home in the evenings is prohibited.
• A short-term rental on a lot that’s 14,500 square feet or more in size may have a gathering f up to and including 40 people. Otherwise, the owner must obtain an event permit.
• Owners can’t rent a short-term rental to a person under the age of 21.
• The owner must be available 24/7 to respond to complaints.
• Any machine, device, or equipment guests use within the short-term rental unit must comply with noise standards
• Owners can’t rent tents, trailers, treehouses, garages, storage sheds, etc. as a short-term rental.

 

Indio can be found in the easternmost region of the Coachella Valley. Indio has become known for the world famous Coachella and Stagecoach music festivals held on the Polo grounds. Indio is also known for its large retirement community and great golf courses. Indio is one of more relaxed cities in Coachella Valley when it comes to short-term rentals.

 

Our recommendations: Despite the busy activity during festival time, we recommend considering one of the other cities in Coachella Valley for your short-term rental due to Indio’s proximity to attractions and activities for visitors.

 

7. Cathedral City

 

TOT Taxes: 12%

Policies:

• Link to restrictions
• Recently, Cathedral City voters approved a referendum that will phase out short-term rentals by 2023. For example, Cathedral City will no longer issue short-term vacation rental permits in certain zones, even if the property is located within the HOA.
• Owner must obtain a vacation rental unit permit from the city before renting a vacation rental unit to any guest for a period of 30 days or less.
• Owner must renew their vacation rental unit permit annually to remain valid.
• The city won’t renew a vacation rental unit permit if there are unresolved city code compliance cases, fines, fees, or city liens on the property.
• Property needs to be in an HOA, and then you apply for a permit which is $523 and renew every year for $510
• Annual inspections from fire department to make sure everything is up to code
• Owners need letter of approval from HOA when filling out application. The city hopes to change this eventually and allow all homes to short-term rent, and not just the properties that are in an HOA.
• If a vacation rental is over 30 days, it’s considered a long-term rental and the permit fee is $58 and renewal each year is $58.
• Owner must provide proof of commercial insurance that covers the rental of the property as a short-term vacation rental.
• As part of the permit application, the owner must agree and consent to a health and safety inspection of the property.
• The city won’t issue a short-term rental permit if the property doesn’t have working smoke and carbon monoxide detectors, electricity, or plumbing.
• Vacation rental guests must stay a minimum of three nights. They must also follow parking, trash, noise levels, occupancy, and health and safety rules.

 

Just a short drive from Palm Springs to the east you’ll find Cathedral City, home to CVRep (Coachella Valley Repertory) and the new Agua Caliente Casino that has just opened its doors.

 

Our recommendation: This city has become a destination for the artist, particularly Cathedral Canyon Cove, where you still can find affordably-priced homes tucked away, surrounded by mountains.

 

8. Indian Wells

 

TOT Tax: 12.25%

Policies:

• Link to restrictions
• Indians Wells has very strict short-term rental regulations.
• Owners need a permit and business license. The permit fee is $159, while the fee for the business license is $89.
• Owners have to rent for a minimum of 29 nights – unless the house falls under an HOA with its own regulations that don’t have a minimum. There are only a few of these and they would be able to specify to the owner if the house falls under that HOA if the owner provides them an address of the house they’re investing in.
• Owners must provide all renters with a Good Neighbor Brochure as part of the rental agreement.
• Short-term rentals must collect a TOT on all nights of stay, which is included in the nightly rental rate.
• No property owner can operate more than one short-term residential property.
• Local contact person must be available 24/7 to respond to complaints.
• Maximum overnight occupancy can’t exceed two people per bedroom, except for children under six.
• The city prohibits guests of short-term rentals from making loud, unnecessary, or unusual noise which disturbs the peace and quiet of the neighborhood.
• Guests must book a minimum of 7 nights at a short-term rental property.
• The outside appearance of the property (i.e. colors, materials, lighting, landscaping, window coverings) shouldn’t conflict with the appearance of the other properties in the neighborhood.

 

Indian Wells is probably the most restrictive when it comes to short-term rentals.  Some HOAs have their own rules that allow it, but most do not. Most homes will need to be rented out a minimum of 29 nights.

 

Our recommendations: If you’re set on buying a home in Indian Wells, we can introduce you to the team at Open Air Homes who can help set up and market your home for extended stays.

 

9. Desert Hot Springs

 

TOT Tax: 12%

Policies:

• Link to restrictions
• Requires a business license, costing $87, which owners must renew every year for the same amount.
• 28 days or more is considered long term, which doesn’t require a business license.
• Owner of a vacation rental unit can’t rent a unit for a period of 30 consecutive days without a valid vacation rental registration certificate.
• The number of occupants shouldn’t exceed two people per bedroom.
• The number of vehicles overnight shouldn’t exceed the number of designated on-site parking spaces.
• Emergency contact person for a short-term rental must be available 24/7.
• If an owner receives a complaint about a guest, the owner must give them a warning or terminate the occupancy.

 

When it comes to Desert Hot Springs, the name really tells it all. The city is known for its many natural hot and cold mineral springs, and has more than a dozen natural mineral springs lodgings in town.

 

Our recommendations: When buying a short-term rental here, make sure to purchase in a gated community as those homes are the most desirable. However, because of its distance to attractions and activities and is located in a high wind zone, you might consider one of the other cities in Coachella Valley for your short-term rental.

10. Coachella

 

TOT Tax: 9%

Policies:

• $164 for a 1 year permit
• Owners must report and pay 9% TOT – transient occupancy tax. 30 days or less is considered short-term – anything longer would be considered long term and doesn’t need a permit.
• Owners also need a letter from the HOA if your home falls within the one HOA in the Coachella Valley, but there are only about 40 homes that fall within it.

 

Coachella is a pretty rural part in the easternmost region of the Coachella Valley and borders Indio which is known for the world famous Coachella and Stagecoach music festivals held on the Polo grounds. There, you can find the Coachella Walls, considered the city’s best kept secret, beautiful murals and paintings that line the downtown area celebrating its history and people.

 

 There aren’t a lot of homes located here, and you’ll find many agricultural farms because of its vast rural areas.