Our family is embarking on a new challenge. After selling our all time best investment, a home in Sacramento we bought after the crash for $74,000, we are rolling the proceeds into another home in Indio, CA which we intend to use as a vacation rental property.
We currently live in San Diego and will continue to for the foreseeable future, but real estate here is not a profitable investment. The Coachella Valley is a natural fit for us, as Nancy and I both come from a long line of desert rats. We met in Tucson, AZ, where I was in graduate school and she was living, and where her sister lives and we currently own 2 rental homes. When she was a kid, Nancy used to visit her grandparents and drive their golf cart around the Cathedral City Country Club, just about a mile from where my family used to rent a condo during winter break. My sister's family lives outside Phoenix and my parents have a home in Rancho Mirage, former and future home of
Presidents and Movie Stars.
Indio is an odd place. It's mostly a working class community that has not seen the best of times, somewhat lacking in tourist facilities such as hotels and restaurants, and whose most prominent construction project appears to be a city jail. It is close to many resort communities, namely Indian Wells and La Quinta. However in recent years it has shown up on the cultural map, thanks to the Coachella Valley Music and Arts Festival, which apparently attracts 250,000 people, and its country music sibling Stagecoach, located at the Empire Polo Grounds. These two events, and to a much lesser extent the BNP Paribas Open tennis tournament in Indian Wells, cause rental prices to skyrocket for 3 weekends a year. Indio is attempting to build on these events by billing itself the "City of Festivals" and organizing several other minor events during the year but none have the draw of these places. In 2016, there was also a huge event called Desert Trip, featuring the Rolling Stones, Bob Dylan, the Who, Paul McCartney, and Neil Young -- a constellation of brilliant aging rockers appealing to America's most income-disposable demographic -- but that seems to have been a one-off event that was not repeated this year.
So apparently the finagle of owning a rental property in Indio is to capture the high daily rates during those 3 events in March and April, and keep it busy during the rest of the winter or rent to a Canadian snowbird from November through February. (Unlike Americans, apparently Canadians can still afford to retire or at least take winters off, and many of them come down to the Palm Springs area.) Then, anything you can get between May and October is gravy. The number of vacation rentals seems to be increasing quickly so at some point it may make more sense to revert to a full-time rental.
Real estate in the Coachella Valley, and around Palm Springs in particular, has the peculiar feature of being laid out in a checkerboard pattern, with land in each square alternately available to buy from the previous owner, or lease long-term from the Agua Caliente Cahuilla band of Native Americans. Thus, many of the available properties in our price range, especially condominiums, have both an HOA and a land lease. You can get a mortgage but the term must end at least 5 years before the end of the lease.
We weren't sure whether to buy a full-time rental or a vacation rental. I had read a blog post on the AirDNA analytics website suggesting that Palm Springs has one of the best vacation rental markets in the country relative to the cost of investment, which made us look more at vacation properties. While this may still be the case, after more research on AirDNA, including a paid subscription, I take their conclusions with a grain of salt. Their estimates seem to be flawed. For example, I met the owners of a property that AirDNA projected would have income of about $90k/year and they told me that was about twice what they actually were getting. Another property in the area AirDNA projected $200k/year for a property with only 3 reviews. I suspect AirDNA extrapolated those 3 peak weeks when this house was rented out to the entire year, even though it is occupied by the owners the rest of the time.
That said, we did a lot of research on where to buy all over the valley, but almost accidentally stopped at an open house that is walking distance from the Empire Polo Grounds, in the Indian Palms Country Club community and wrote an offer. It's a beautiful 3-bedroom house built in 2005 and in mint condition. Indian Palms is a nice, laid back gated community with a golf course, a few community pools, and a "Lifestyle Center" with a fitness center.
We will be listing this on AirBnB in the next week or two and will "soft open" by offering it at a low price initially, in order to accumulate some positive reviews. If you are interested in staying in it, please let us know.
