Trying to decide if Desert Hot Springs is a smart first investment? You are not alone. Many first-time investors look here because entry prices are lower than nearby Palm Springs while the location still offers desert lifestyle and access to valley amenities. In this guide, you will see the current price and rent ranges, cash flow examples, short-term rental rules, holding costs, and a clear checklist to help you buy with confidence. Let’s dive in.
Why investors look at Desert Hot Springs
Desert Hot Springs sits just north of Palm Springs, roughly a 20-minute drive depending on traffic. That proximity keeps you close to jobs and attractions without paying resort-town prices. For a first purchase, affordability can lower your down payment and help you qualify more easily if you plan to live in the home first, then rent it later.
Recent market indexes show typical home values around the low to mid $300,000s, with monthly snapshots of median sales often landing between about $373,000 and $440,000. Days on market tend to run in the multiple-week range, which can give you room to negotiate. The housing stock skews toward single-family homes, with manufactured and small multifamily options offering lower price points in some areas.
If you want a quick sense of place, note that Desert Hot Springs is a short drive from Palm Springs, which many buyers appreciate for convenience and amenities. You can confirm the route and drive time using a simple distance tool like Travelmath’s drive-time page for the two cities.
What the numbers look like today
Purchase prices
- Recent value indexes place typical home values near $370,800 as of late 2025.
- Monthly sales data show a range roughly $373,000 to $440,000, depending on timing and the sample.
These ranges matter for financing and down payment planning. A lower purchase price reduces your upfront cash commitment and may make owner-occupant loan programs more accessible.
Rents: conservative vs. market asking
- The U.S. Census reports a long-window median gross rent around $1,339 to $1,412 in Desert Hot Springs.
- Advertised asking rents on marketplace indexes often show higher levels across current listings, commonly in the $1,900 to $2,200 range depending on bedroom count and property features.
Use both figures when you model cash flow. The Census median is a conservative baseline. Asking-rent indexes reflect current listings but can be seasonal and property-specific.
Competition and inventory
Recent snapshots describe Desert Hot Springs as “somewhat competitive,” with homes often taking several weeks to sell. It is not as fast-moving as top luxury pockets of the valley, but limited inventory still requires preparation. Pre-approval and a clear plan help you move efficiently when the right property appears.
Short-term rentals: rules and reality in DHS
Short-term rentals can lift income in peak season, but Desert Hot Springs has firm rules you must follow:
- You need a city vacation-rental permit. The city also requires you to collect and remit 12% Transient Occupancy Tax (TOT) plus a 1% TBID assessment on stays of 28 nights or fewer. See the city’s vacation-rental program for details on the permit process, insurance, and ongoing reporting.
- The municipal code caps permits at 4% of housing parcels and requires 500 feet of spacing between permitted vacation rentals. When the cap is reached, new applicants may face a waiting list.
What this means for you: STR access is limited and not guaranteed. Always confirm current permit availability, spacing, insurance requirements, fees, and the tax remittance process with the City before you underwrite a deal around short-term income.
Will a first rental cash flow?
Below are three example pro-formas using common assumptions. These are illustrations, not predictions. Update them with your lender quote and real comps.
Assumptions used in all three examples:
- Purchase price: $375,000; 20% down; loan $300,000
- 30-year fixed rate: 6.09%; P&I ≈ $1,817/month
- Property tax proxy: 1.02% effective rate (parcel-specific bills vary)
- Insurance: ~$1,200/year for illustration
- Expenses: modeled using a conservative “50% of rent” operating-expense rule of thumb (excludes mortgage)
Scenario A — Conservative rent (Census median, ~$1,412/month)
- Annual rent: $16,944; Expenses (50%): $8,472; NOI: $8,472
- Annual mortgage P&I: ~$21,804; Net cash flow: ~−$13,332/year (≈ −$1,111/month)
- Approximate cap rate: ~2.26%
Scenario B — Mid rent (~$1,800/month)
- Annual rent: $21,600; Expenses (50%): $10,800; NOI: $10,800
- Annual mortgage P&I: ~$21,804; Net cash flow: ~−$11,004/year (≈ −$917/month)
- Approximate cap rate: ~2.88%
Scenario C — Higher asking rent (~$2,200/month)
- Annual rent: $26,400; Expenses (50%): $13,200; NOI: $13,200
- Annual mortgage P&I: ~$21,804; Net cash flow: ~−$8,604/year (≈ −$717/month)
- Approximate cap rate: ~3.52%
Key takeaway: With typical 20% down and a 30-year loan near the low-6% range, many single-family rentals in Desert Hot Springs do not show positive cash flow at purchase. The math can improve with a lower rate, a larger down payment, buying at a discount, or qualifying for STR income where permitted. Small changes in rate or rent can swing results by hundreds per month, so sensitivity testing is essential.
Expenses to budget in Desert Hot Springs
Understanding holding costs helps you avoid surprises.
- Property taxes. California’s base levy is about 1% under Prop 13, plus voter-approved assessments. Effective rates vary by parcel. Check the Riverside County Treasurer-Tax Collector for the billing schedule and due dates, and run parcel-level estimates before you offer.
- Insurance. Get quotes for homeowner and landlord policies. If you plan to pursue STR, verify required coverage and liability limits with the City’s permit rules.
- Utilities. Cooling is a major expense in the desert, and Southern California electricity rates have risen in recent years. If you will include utilities in rent or operate an STR, model higher summer usage. Water service in Desert Hot Springs is provided by Mission Springs Water District; verify current rates and any conservation programs that could affect costs.
- Management, vacancy, maintenance, and capital reserves. If you hire a manager, budget around 8% to 12% of collected rent. Even if you self-manage, plan for vacancy and ongoing repairs. Many investors use the “50% rule” as a simple screening tool, then refine with a line-by-line budget during due diligence.
Demand drivers and seasonality
- Affordability relative to nearby resort cities. Lower home prices and rents attract value-focused renters and first-time buyers while still keeping you near Palm Springs jobs and amenities.
- Tourism and winter season. Demand often strengthens from November through April, with spikes during major Coachella Valley festival weeks. Analyses of neighboring markets show how event weeks can lift short-term rates, but that surge is not year-round.
- Local income context. Household and per-capita incomes run below many other valley cities, which helps support steady demand for more affordable rentals but can also limit rent growth driven by local wages alone.
Due diligence checklist for first-time investors
Use this list to sharpen your underwriting and avoid costly misses.
- Short-term rental compliance. Confirm the current permit cap, spacing rule, insurance requirement, and the 12% TOT + 1% TBID with the City of Desert Hot Springs before you rely on STR income.
- Parcel-level taxes. Pull the tax history and estimate the new-buyer bill, including any special assessments. Factor this into your pro-forma, not just a county average.
- Lending plan. Compare investment-loan requirements with owner-occupant options. Some buyers live in the home first to access lower-down financing, then convert to rental later under program rules.
- Landlord laws. Review California’s Tenant Protection Act (AB 1482) for rent-cap and just-cause basics. Single-family homes can be exempt, but only if ownership and written notice requirements are met.
- Insurance and liability. Price homeowner, landlord, umbrella, and if needed, STR-specific coverage. Verify that any platform coverage meets city permit standards.
- Utilities and water. Confirm electricity rate plans with your utility and water rates with Mission Springs Water District. If the property has a pool or lush landscaping, model higher usage and seasonal costs.
- Local comps and team. Pull 3 to 6 recent rental comps and sales comps, speak with at least one property manager about fees and realistic rents, and get written quotes from a lender and insurance agent.
Bottom line: Is DHS a smart first investment?
It can be, if you value lower entry price and you approach the numbers with clear eyes. Today’s lending rates mean many long-term single-family rentals will not cash flow on day one at 20% down, so plan for that reality. If you secure a better rate, buy well, increase your down payment, or qualify for a permitted STR, the math can improve. The right property, realistic rents, and disciplined due diligence are your levers.
If you want local guidance on neighborhoods, rental comps, and a purchase plan that fits your goals, reach out to our team. We are happy to walk you through options, run scenarios, and help you move from first look to first door.
Ready to talk through your plan? Connect with Destiny Deam and schedule your free consultation.
FAQs
Are Desert Hot Springs home prices still lower than Palm Springs?
- Yes, recent indexes show Desert Hot Springs typically offers lower entry prices than nearby resort cities, which is why many first-time investors start here for affordability.
What are the short-term rental rules in Desert Hot Springs?
- You need a city vacation-rental permit, must collect and remit 12% TOT plus a 1% TBID on stays of 28 nights or fewer, and permits are capped at 4% of housing parcels with a 500-foot spacing rule.
How much long-term rent can I expect in Desert Hot Springs?
- A conservative baseline is the Census median gross rent around $1,339 to $1,412, while current advertised asking rents often fall between roughly $1,900 and $2,200 depending on property details.
What carrying costs should I budget for a DHS rental?
- Plan for property taxes, insurance, utilities (notably summer cooling), water service, management, vacancy, and maintenance; many investors start with a 50% of rent expense rule, then refine by line item.
Does California’s AB 1482 rent cap apply to single-family rentals?
- Some single-family homes can be exempt if ownership and written-notice requirements are satisfied; review the law and consult your advisor to confirm how it applies to your property.
