Investment Mortgage

Explore Airbnb-friendly neighborhoods in San Diego in 2024

By Milo

February 1, 2024 6 min read

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Explore Airbnb-friendly neighborhoods in San Diego in 2024

San Diego, a city celebrated for its stunning beaches and year-round sunny climate, is a prime spot for Airbnb investments. According to the Greater San Diego Association of REALTORS, the top international real estate buyers in San Diego hail from China (35%), Canada (19%), and Mexico (12%), with Asian Indian investors also having a significant presence (17%). California is a major hub for international real estate investment, accounting for 15% of the total, only behind Florida's 22%. San Diego stands out in the Californian market for its cost-effectiveness, boasting median property prices almost 50% lower than those in San Jose and San Francisco. This affordability, combined with the city's tourist appeal and vibrant culture, makes it an attractive option for international investors looking to capitalize on Airbnb opportunities.

Overview of the Short-term Rental Market in San Diego

The short-term rental market in San Diego showcases strong potential for Airbnb investments. With an average daily rate (ADR) of $333.9, peaking at $405 in July, and a consistent occupancy rate of 66%, reaching up to 85% in July, the market is robust. San Diego's market is supported by 10,792 listings, generating an average revenue of $5,644 and a notable $8,800 in July. The revenue per available room (RevPAR) stands at $229, increasing to $369 on weekends. July emerges as the best-performing month with a market score of 60, in a city where the average home value is $960,202.

In comparison, Los Angeles presents a different scenario. It has a lower ADR of $288.8 and a maximum daily rate of $302. Occupancy rates peak at 66% in June, with a general rate of 60%. Despite having more listings at 13,390, LA's average revenue is lower at $4,275, peaking at $4,900 in July. LA's RevPAR is $178.1, with weekend RevPAR at $318, and holds a higher market score of 80, with average home values at $918,087.

San Diego's higher ADR and RevPAR, especially during peak months, alongside its relatively higher home values, may offer more lucrative investment opportunities compared to Los Angeles, particularly for investors seeking higher returns per listing.

Here is a comparison of the short-term rental market in San Diego and Los Angeles presented in a table format:

Airbnb - San Diego vs Los Angeles.png Source: Masterhost Canada

Best Cities in San Diego for Airbnb Rentals

San Diego's diverse landscape offers a range of attractive cities for Airbnb rentals, each with its unique charm and appeal:

  • Carlsbad: Known as 'The Village by the Sea', Carlsbad offers a quintessential Southern California experience with its picturesque beaches and charming downtown area. It's popular among tourists for its relaxed beach town vibe, beautiful coastal views, and family-friendly attractions like LEGOLAND California Resort. The city's blend of coastal beauty, leisure activities, and upscale neighborhoods make it a lucrative choice for Airbnb investments, appealing to both vacationers and business travelers.

  • Encinitas: This coastal town embodies a classic surf culture and boasts some of the best waves on the West Coast. Encinitas is not just about surfing; it's also known for its vibrant botanical gardens, historic downtown, and organic dining options. The laid-back atmosphere, coupled with its natural beauty, makes Encinitas a desirable location for short-term rentals, attracting beach lovers and those seeking a tranquil escape.

  • Escondido: Located in a valley surrounded by rocky hills, Escondido is ideal for those who enjoy a mix of outdoor adventures and cultural experiences. It’s home to the San Diego Zoo Safari Park, numerous wineries, and a historic downtown with a rich arts scene. Escondido’s appeal lies in its blend of natural beauty, wildlife attractions, and cultural richness, making it a unique destination for Airbnb guests.

  • Vista: Known for its mild climate and rich agricultural history, Vista offers a more laid-back, small-town feel. It's home to numerous craft breweries and the Wave Waterpark, making it a family-friendly destination. Vista’s appeal for Airbnb investments lies in its affordability, proximity to beaches, and the appeal of a relaxed, community-focused lifestyle.

  • Downtown San Diego: As the urban heart of the city, Downtown San Diego is a hub of business, entertainment, and nightlife. The area features iconic attractions like the Gaslamp Quarter, Petco Park, and the San Diego Waterfront Park. With a mix of modern condos, historical sites, and a bustling nightlife, it attracts a wide range of Airbnb guests, from business travelers to tourists seeking urban adventures.

Short-term Rental Occupancy Rules in San Diego

San Diego has implemented detailed Short-term Residential Occupancy (STRO) regulations to manage the city's rental market, particularly for Airbnb and similar platforms. These regulations are categorized into four license tiers, each designed to address different types of short-term rentals, from part-time rentals to whole home listings, including specific provisions for the Mission Beach area.

The tiers are defined as follows: Tier 1 for rentals of 20 days or less per year, without the requirement for the owner or permanent resident to be onsite. Tier 2 focuses on home sharing for more than 20 days per year, requiring the owner or permanent resident to reside onsite. Tier 3 is for whole home rentals for more than 20 days per year, where the owner or permanent resident does not reside onsite. This tier also includes a minimum STRO utilization of 90 days per year to maintain the license.

Tier 4 applies exclusively to whole home rentals within the Mission Beach Community Planning Area, with similar requirements to Tier 3 but tailored to the local context. Each tier has specific application and license fees, ranging from $25 for application and $100 for license fees in Tier 1, up to $70 for application and $1,000 for license fees in Tiers 3 and 4. These licenses expire two years from the date of issuance and can be renewed in compliance with the ordinance. Importantly, the number of licenses issued is capped at 1% of San Diego's total housing units for areas outside the Mission Beach Community Planning Area and at 30% within it. A two-night minimum stay is required for guests.

To legally operate an STRO, hosts must obtain a Transient Occupancy Tax Certificate and ensure compliance with the city's regulations, including tax collection and remittance. The City of San Diego has also established operating requirements for hosts, including adherence to a Good Neighbor Policy, human trafficking awareness, and, for those in Tiers 3 and 4, quarterly reporting requirements.

For detailed information on each tier, application processes, fees, and host operating requirements, visit the City of San Diego's official website on Short-Term Residential Occupancy.

A word to international investors

San Diego, with its diverse attractions and favorable Airbnb market, offers a solid investment opportunity. Its higher daily rates and revenues compared to Los Angeles, combined with unique neighborhoods like Carlsbad and Downtown, make it attractive. However, staying updated on local STRO regulations is crucial for a successful investment. Explore San Diego for potential Airbnb ventures, keeping market trends and rules in mind for optimal returns.

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The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

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