Can You Still Buy a Short-Term Rental Investment Property in California?

California has no single statewide law governing short-term rentals. Instead, every city sets its own rules, and the range is wide: some markets have all but shut the door on investment-property short-term rentals, while others still welcome them with a straightforward registration process. Starting in 2026, a new law, SB 346, adds another layer by requiring short-term rental platforms to share host data with the municipalities where listings operate, which makes enforcement far easier than it's been. Before putting an offer in on anything with short-term rental income in the plan, it's worth knowing exactly where your target city falls on that spectrum.

Which California Cities Still Allow Investment-Property Short-Term Rentals?

The table below summarizes the rules in several of the state's most-searched short-term rental markets. "Unhosted" means the owner doesn't live on site during the guest's stay, which is the scenario that matters most for a pure investment property.

Source: awning.com, California short-term rental law roundup by city, current as of this writing; individual city STR ordinance pages linked where cited.

Los Angeles permits short-term rentals only in a primary residence, meaning the owner must occupy the home at least 90 days out of the year. Unhosted rentals, where the owner is away during the guest stay, are capped at 120 nights a year; hosted stays have no cap. Registration runs $89 one time plus a $20 annual renewal. That structure makes LA workable for an owner who plans to live in the property and rent out a room or rent the whole unit while traveling, but it rules out a pure investment property bought solely to run as an unhosted rental.

San Francisco goes further, requiring permanent-resident status to register at all, and caps unhosted nights at 90 per year with quarterly compliance reporting required from the platforms themselves. In practice, this makes a San Francisco property purchased purely as an investment-grade short-term rental very difficult to operate legally unless the owner genuinely lives there full time.

San Diego takes a tiered approach instead of an outright ban. Tier 1 (host present) and Tier 2 (primary residence, host absent) both run $75 to $100 a year with no night cap. Tier 3, the investment-property tier where the owner neither lives there nor hosts, is capped citywide at 2% of each neighborhood's housing units, and that cap fills fast: multi-year waitlists are typical for anyone trying to register a new Tier 3 property.

California's Coastal Commission jurisdictions, which include Santa Barbara, Carmel, and Big Sur, prohibit most short-term rentals outright, regardless of ownership structure. If a listing in one of these areas looks like an active short-term rental online, treat that as a sign the regulatory risk has already been priced in, not as proof the use is compliant.

Palm Springs stands out as the most investor-friendly major California market for this use case. There's no residency requirement, no annual night cap, and the registration fee runs roughly $100 a year. It's the one market on this list where buying a property specifically to run as an unhosted short-term rental is both legal and relatively simple to set up.

What Is SB 346, and Why Does It Matter for STR Investors?

SB 346, which takes effect in 2026, requires short-term rental platforms to share host and listing data directly with the municipalities where those listings operate. For cities that have struggled to enforce their own STR rules, largely because they had no reliable way to identify which listings belonged to which addresses, this closes that gap. The practical effect for investors is straightforward: operating in a gray area, or simply hoping a city doesn't notice an unregistered listing, is a materially riskier strategy than it was even a year ago. Any STR investment plan in California should now assume the local rules will actually be enforced, not treat enforcement as unlikely.

How Do You Finance a Short-Term Rental Investment Property?

Short-term rental properties don't fit neatly into conventional mortgage underwriting, which qualifies borrowers based on personal income, tax returns, and debt-to-income ratio. A DSCR loan, short for debt service coverage ratio, qualifies the property instead of the borrower: the lender compares the property's projected rental income, often based on a market rent or short-term rental income study ordered during underwriting, against its debt obligations. A DSCR at or above 1.0 means the property's income covers its own debt service; most lenders target a ratio in the 1.10 to 1.25 range for standard pricing, though some allow lower ratios with strong compensating factors like high credit scores or cash reserves. Typical minimum credit scores for DSCR programs run from the mid-600s to low-700s, though exact requirements vary by lender and property type.

Because DSCR loans are usually classified as business-purpose financing rather than consumer credit, they're typically exempt from the federal disclosure rules that apply to owner-occupant mortgages, though that exemption is fact-specific and depends on how the loan is structured. Rise Realty's affiliated lender, Tried & True Home Loans, specializes in DSCR financing for investors, including for short-term rental properties. Specific rates, required reserves, and qualifying ratios depend on the individual property and borrower, so the right next step is a direct conversation rather than a published rate sheet: call 866-344-8845 to talk through what a short-term rental purchase would actually qualify for.

Is Palm Springs Really California's Best Market for STR Investors?

Based on the current regulatory landscape, Palm Springs is the clearest answer among major California markets for an investor who wants to buy and operate an unhosted short-term rental without a residency requirement, a night cap, or a lottery waitlist. That said, STR ordinances change. Desert cities and resort markets across California have tightened these rules before in response to housing-availability pressure, so verify the current ordinance directly with the city, not from a listing description or a general web search, before closing on anything with STR income built into the underwriting.

Frequently Asked Questions

Is it legal to buy an investment property in California specifically to run as a short-term rental? It depends entirely on the city. Palm Springs allows it with no residency requirement or night cap, San Diego allows it in a capped, lottery-waitlisted tier, and cities like San Francisco and most Coastal Commission jurisdictions make it effectively impossible without living there full time.

What is SB 346, and when does it take effect? SB 346 is a 2026 California law requiring short-term rental platforms to share host and listing data with the municipalities where those properties operate, significantly strengthening local enforcement capability.

Can I get a conventional mortgage for a short-term rental investment property? You can, but conventional underwriting is based on your personal income and debt-to-income ratio rather than the property's rental income. A DSCR loan qualifies based on the property's projected income instead, which is often a better fit for investors buying specifically for short-term rental cash flow.

Does owner-occupancy affect what I can do with short-term rentals in Los Angeles or San Francisco? Yes. Both cities require the owner to actually live in the property to register it as a short-term rental at all, which rules out a pure investment property with no owner-occupancy component in either city.

What credit score do I need for a DSCR loan? Typical minimum credit scores for DSCR programs fall in the mid-600s to low-700s range, though exact requirements vary by lender, property type, and the property's own debt service coverage ratio.

Bottom Line

California's short-term rental landscape isn't one market, it's dozens of them, each with its own rules on residency, night caps, and registration. SB 346 means those rules are about to be enforced more consistently than they've ever been, which makes it worth confirming the current ordinance directly with the city before buying anything with STR income in the underwriting. If you're weighing a short-term rental purchase anywhere in California, Rise Realty can help you evaluate specific markets and properties, and Tried & True Home Loans can walk you through DSCR financing built around the property's actual income potential. Call 866-344-8845 to talk through financing, or contact Rise Realty California to start looking at specific properties.

Sources

• awning.com, California short-term rental laws by city, current roundup
• City of Los Angeles, Home-Sharing Ordinance registration requirements
• City and County of San Francisco, short-term residential rental registration requirements
• City of San Diego, short-term residential occupancy tiered permit program
• California Coastal Commission, short-term rental policy in coastal jurisdictions
• City of Palm Springs, vacation rental registration requirements
• LendingOne, guide to DSCR loans for real estate investors