I Tried Building an Airbnb in Joshua Tree

In this video, I document our journey as Rachel and I try to build a vacation rental in Joshua Tree, California.

Backstory

It all started with a trip to Palm Springs.

We love Palm Springs. We usually try and go once a year to get out of LA for some peace and quiet, relaxation, and heat. It’s really hot here… especially in the summer months.

But, we’re not alone. About 2 hours east of LA in the Coachella Valley, Palm Springs is a resort town. The population of 44,575 triples between November and March when snowbirds flock to escape the cold elsewhere.

Anyways, since our first trip here, we dreamed of owning a vacation rental where we could come stay to relax when we needed a break from the city and rent out when we weren’t there.

With home prices in LA out of reach, we were renters. But we liked the idea of having our first home purchase be an investment as well.

But this video isn’t about Palm Springs. A few years ago, they cracked down on vacation rentals by enacting strict ordinances, including that owners can only book a maximum of 36 short-term stays per year.

Now it was on this trip in 2019 when I read an article about the rise of vacation rentals 40 miles north in Joshua Tree.

Joshua Tree

Josha Tree is in the high desert, north of Coachella Valley. It’s less developed and more remote than Palm Springs, so real estate is more affordable. It’s also home to Joshua Tree National Park, which gets millions of visitors per year.

A lot of people in LA go to Joshua Tree for a more secluded escape – backpackers, artists, millennials on yoga retreats and young actors with big career decisions ahead of them.

There were fewer ordinances in Joshua Tree, more land, and maybe most importantly: more affordable.

So here’s what made it the ideal place to have a vacation rental:

First, it’s about 130 miles from the second largest city in the US – Los Angeles.

Second, it’s home to one of the 9 national parks located in California.

Third, visitation of Joshua Tree National Park had been increasing pretty dramatically year over year.

Fourth, there aren’t a lot of hotels or motels in the area compared to the amount of visitors.

Fifth, it’s relatively affordable.

Sixth, the nightly rates compared to the total investment make it a very appealing return on investment.

Seventh, it’s not overly seasonal. Of course, it is the desert, so summer months are less popular than cooler months, so spring and fall are most popular – but it’s better than something like a ski town where it’s more reliant on one specific season.

And eighth, it’s close enough to where we live to both check in on it and enjoy it for ourselves when it’s not being rented.

BUY OR BUILD

Whenever I get obsessed… or -- uhh, whenever I get an idea of something I want to pursue, I research the pants off of it. I wanted to make sure that Yucca Valley was the great market I thought it was. I want to see what other rentals are going for, how often they’re booked, and what amenities they have. So that’s what I did. Things looked good.

Once we decided on the Yucca Valley / Joshua Tree area, we needed to decide on whether to buy or build.

We had our eye on a 3 bed 5 bath property on 2 and a half acres. It also had an ADU or an accessory dwelling unit on the property, which would be perfect for the type of rental we wanted.

It was less than 20 minutes from the park and listed for about $300,000. But it was pretty outdated and for it to be a competitive vacation rental, it would need at least $150,000 to $200,000 in renovations.

There wasn’t anything else on the market that really caught our eye… but there was a lot of vacant land. A lot. If we decided on new construction, we could build it exactly how we wanted it, with a vacation rental in mind.

BUILDER MEETING

Next, we met up with a builder in the area who had some projects going on and a lot available for a future project. We first looked at a past project that he had done… and then went to a project he had just laid the foundation for. We really liked the layout of this plan because it’s main focal point is the courtyard which emphasizes the indoor/outdoor living people enjoy in Southern California.

Then, we looked at a lot he had where we could build a similar project.

Our initial plan was to spend $40,000 on the land, get the home built for $435,000 with a construction loan, and then convert that loan to a traditional mortgage.

We did have a few concerns however. We wanted to really have control over the look and feel of… well every inch of it, essentially… and the way the agreement between us and the builder would be structured would make us feel limited in our choices. Also, the home was 1100 square feet, and we really wanted a larger home to accommodate larger groups of people.

Hiring an Architect

We ultimately made the decision to hire an architect to draft plans that would give us everything we were looking for in a property. After some mild Googling and emailing, we met with one firm that really seemed to understand what we were after. Koto focuses on sustainable designs inspired by Scandinavian and Japanese design. Even though they are based in the UK, they partnered with a Southern California company called Plant Prefab to bring their designs to America. So for us, it seemed like the perfect fit.

We started by sending them our wish list for a build. We weren’t sure how much everything would end up costing, so we just started with our ideal scenario: a 3 bed 2 bath main house with lots of windows, accordion doors, an open kitchen, etc.

Then, we wanted a 1 bed 1 bath casita or guest house. And then a finished garage that could be used as a flex space and potentially have a murphy bed to accommodate more guests.

And finally, a courtyard with a wading pool, built-in seating, a fire pit, and an outdoor shower.

That all sounds like a lot, but this would make it a highly sought after vacation rental.

And we also sent them a few photos just so they can picture what we were talking about. They got to work.

Getting a Loan

Throughout the entirety of this process, one of the most challenging aspects was finding a lender who would give us a loan that would work for this project. New construction adds an additional layer to the standard mortgage process, but also the fact that it wasn’t going to be our primary residence. I called and emailed just about anyone I thought might be able to help us out. When I found people that supposedly could, just getting a call back from them was virtually impossible, because most lenders at this time were slammed with everyone taking advantage of the low interest rates by refinancing.

Meanwhile, a few weeks later, the architects sent us their design.

It. was. Awesome.

We then gave some feedback for potential changes and talked through different ideas. It’s invaluable to have architects that think about things that would never even occur to us, and they have the expertise that we do not.

Searching for Land

You can often wrap the cost of the land in with a new construction loan, but lenders advised me it’s simpler if we already own the land outright. Now around this time, I took about $8,000 in my Robinhood account to over 40 grand… by buying puts when the market was crashing. I withdrew this $40k to my bank before I could give it back to the market.

Between the time differences, the world shutting down, and juggling other projects, it took several months to get our plans complete, but it was worth the wait.

Hiring a Builder

We then looped in the builder – Plant Prefab – in to our project. Prefabricated homes are where the bulk of the home is built in a factory and then shipped on-site. This can cut some time and cost from a traditional build. Plant Prefab was one of the few we found that would build custom plans. Most prefab companies have their own set of floorplans that they make for efficiency and cost reasons.

By the end of May, we had preliminary pricing from the builder. This build would cost about $660,000… but that doesn’t include any site work like pouring the foundation, hooking up utilities, painting, and a handful of other things. Oh, and we’d still have to buy a piece of land. Which… uh… we did.

The Property

So we ended up with a beautiful 10 acre lot 12 minutes into town and 22 minutes to the park entrance. Utilities were at the property line, it had views of the mountains, so it was perfect.

I finally talked to a lender who had a loan for a new construction investment property. Finally.

We had our plans. We had our prefab builder. We just needed a contractor to handle the site work.

But this was spring 2020… and a few weeks after we found the lender, he told me they were pausing that loan product due to the uncertainties of COVID.

So yet again, we were without a loan.

The more we thought about the next few years of our lives, the more we considered the option of putting our plans on hold and instead, making our first home purchase a place where we’d settle down. So that’s what we did. In October of 2020, we put an offer on a home we really loved. Got out-bid and was the backup offer. In December, the original buyers fell out of escrow, and we stepped in. Exactly one year ago today, we closed on our dream home. This isn’t it, though. We’ve been remodeling it from across the country and have never actually stepped foot in it, but that’s a story for another time.

And then a week ago, we made the bittersweet decision to list the lot we bought in Joshua Tree. With the expenses of buying a new home and renovating it and living elsewhere while it has been under construction, we would rather have the cash on hand if needed. Plus this real estate market seems very bubbly and macroeconomic factors make the future look a bit concerning.

We listed our lot for $115,000 and within four days, got it under contract for $100,000. It is pretty cool to think that my $8,000 in Robinhood deposits… plus about $10k from our savings… turned into a $100,000 piece of land.

This certainly isn’t the outcome we expected when we started this journey back in the summer of 2019. So much time, energy, and money went into trying to make this dream a reality. Most often when I’m this determined to make something happen, I can find a way to do so, but getting new construction built in 2020 just wasn’t in the cards for us. And obviously, things ended up working out just fine, even if it was different than we thought. But all of that being said, we still LOVE our house plans and… well… who knows what the future will bring?

Thanks for watching.