Model Case: Short-Term Rental Homes in Joshua Tree, San Bernardino County, California, DSCR Loan

A model feasibility case built only from public data. The parcel, borrower and operator are hypothetical; no client file or engagement data is used. The case follows the house format: at a glance, determination, program eligibility, regulatory pathway, market analysis, full cost table, operating assumptions, ten-year pro forma, DSCR by year and by month, break-even, sensitivities, valuation indication and conditions. Figures are as of October 8, 2026. Part of the glamping and short-term rental feasibility study cluster; format detail on short-term rental community and portfolio feasibility. This case is written for a non-bank DSCR lender and for the sponsor's own capital; no SBA or USDA programme applies, because a residential rental held for lease is a passive business under 13 CFR 120.110(c) and residential housing is excluded under 7 CFR 5001.118(a).

The project is not feasible as proposed, on two independent grounds. The first is the ordinance. San Bernardino County Code Chapter 84.28 allows at most two short-term rental permits on a parcel of two acres or more, one on a parcel under two acres, and no more than two permits to any owner, with partial ownership counted; six homes on one parcel under one LLC cannot be permitted, and dividing the ownership among related entities to collect six permits is the structure the 2022 rewrite was written to stop. The second is the arithmetic. At 2026 construction cost a 1,500 sq ft design home with a pool and spa costs about $495,000 before land, site work and soft costs, or $783,212 per home all in, against a market where the typical listing earns $53,900 a year before host expenses (AirDNA, October 6, 2026) and ADR has fallen 12.3 percent in a year. Stabilized NOI of $67,675 on six homes covers $298,420 of debt service 0.23x.

The project is feasible as restructured, subject to the conditions at the end of this page, and the restructure changes what the project is. Two existing three-bedroom homes on separate parcels are acquired at the market's asking level ($419,000 for a 1,494 sq ft 2005 home on 0.46 acres; the September 2026 median sale was $424,900 at $336 per sq ft), renovated to the design standard the market pays for, and fitted with pools and spas, at $701,974 per home all in. One owner holds the two permits the ordinance allows. The DSCR loan is sized to full-cost coverage: $322,908, or 23.0% of cost, which stabilized NOI of $35,042 covers 1.28x in year 3. The sponsor funds $1,081,040. This is an equity investment with a small loan, and the case says so.

The distinction that matters for the lender is the coverage test. A DSCR lender's standard test divides gross rent, or a haircut STR projection, by principal, interest, taxes and insurance and ignores operating cost. On that test the lender's own 75 percent loan-to-cost offer of $1,072,208 shows 1.19x on gross revenue including cleaning fees (0.94x on lodging revenue alone), which clears a 1.0x programme floor and sits just under a 1.25x one, so the loan would be approved or trimmed by a few points, not declined. On a full-cost basis the same loan is covered 0.39x, because platform fees, cleaning, pool and utility costs in a desert, a 1.30 percent effective property tax and California insurance consume about 75.0% of revenue. A feasibility study reports the second number; the first is a lender's underwriting convention, not evidence that the project carries its debt.

The homes are in the unincorporated Desert Region, where the county issues STR permits; the incorporated towns nearby cap supply differently (Yucca Valley at 10 percent of its detached single-family inventory; Twentynine Palms at 500 units with five per entity). The county has no basin-wide numeric cap; the June 11, 2024 Housing Element Program 4 study on STRs and housing supply produced no cap ordinance as of mid-2026, and the 2022 rewrite's per-owner and per-parcel limits are the binding constraint. Pool construction and the renovation need county building permits; septic capacity for eight occupants per home is confirmed through the county's local agency management programme site evaluation. Water is from Joshua Basin Water District where mains exist (3/4 inch meter capacity charge $9,696, non-tract connection up to $4,500, monthly base $45.55 plus tiered commodity charges from $8.00 per unit, schedule effective February 1, 2025), otherwise from private wells. The state Short-Term Rental Facilitator Act (SB 346, effective January 1, 2026) applies only where the local agency opts in, and no county opt-in was found.

Demand. Joshua Tree National Park recorded 2,932,644 recreation visits in 2025, after 2,991,874 in 2024, 3,270,404 in 2023, 3,058,294 in 2022, 3,064,400 in 2021 (the first year above three million) and 2,988,547 in 2019: a plateau, not growth, since 2021. The drive market is Los Angeles, Orange County and San Diego at about two and a half hours. The seasonal pattern is the inverse of a mountain market: March is the strongest month and July the weakest (AirROI: peak month 63.2 percent occupancy at a $390 ADR, trough 27.6 percent at $278), with summer daytime highs above 100 degrees.

Supply. AirDNA's Joshua Tree page (updated October 6, 2026) shows 2,727 active listings, up 55.4 percent in a year, 53 percent occupancy (up 4.6 percent), a $302 ADR (down 12.3 percent), $161 RevPAR (down 7.4 percent) and $53,900 of revenue per listing, with a seasonality subscore of 88 and a regulation subscore of 79. AirROI counts 1,214 listings for August 2025 to July 2026 at 44.9 percent occupancy, a $320 ADR, $154 RevPAR and $48,775 of revenue, with supply up 6.5 percent and revenue up 6.4 percent; 36.9 percent of listings are two-bedroom and 40.5 percent three bedrooms or more. The listings jump in the AirDNA series reflects a boundary and channel change as much as new supply, but the ADR decline is a published downside datapoint and drives the first sensitivity. The resale market gives the acquisition basis: a median sale of $424,900 at $336 per sq ft in September 2026, 507 active listings and 135 days on market (Movoto). The 0.46-acre 2005 home at $419,000 is the model's acquisition comparable.

ADR and occupancy. A renovated three-bedroom home with a pool and spa is modelled at $320, the AirROI market ADR and above AirDNA's $302 all-listing figure, with monthly occupancy shaped on the March peak and July trough and averaging 47.4%, between AirROI's 44.9 percent and AirDNA's 53 percent. Cleaning fees of $225 per stay on a three-night average stay and $10 per night of pet, hot tub and firewood fees are modelled as $85 per occupied night of other revenue with a 70 percent direct cost (contract cleaning). The ramp is a model assumption: 85 percent in year 1, 95 percent in year 2, stabilized from year 3.

Stabilized revenue in year-1 dollars is $140,227 on 346 occupied nights, or $70,114 per home, 30.1% relative to the AirDNA market average of $53,900, which is where a renovated pool home should sit.

The restructured project is owner-operated with a local co-host for 24-hour response; third-party management at 20 percent of revenue is a sensitivity. Cleaning is contracted per turn and funded from the cleaning fee. Utilities are $14,000 a year for two pool homes in the desert, anchored to Joshua Basin Water District's base and commodity charges and Southern California Edison residential rates; insurance $9,000 as a model assumption for California short-term rental cover with pools; property tax at Joshua Tree's 1.30 percent median effective rate (Ownwell, April 2026) on the acquisition and improvement basis, $16,500; county permit renewals $550 per home; pool service, internet and streaming, landscaping and pest control as fixed items. Distribution and card processing is 10.0 percent of lodging revenue (Airbnb's 15.5 percent host-only fee blended with Vrbo's 12 percent from October 29, 2026 and direct bookings). Marketing is 2.0 percent and administrative 3.0 percent of revenue; repairs and maintenance 4.0 percent and supplies 3.0 percent of lodging revenue; the replacement reserve is 3.0 percent of revenue. Expenses grow 3 percent a year. Transient occupancy tax is a pass-through and is excluded. Stabilized NOI margin is 25.0%.

The weakest three consecutive months are Jul, Aug, Sep, the desert summer: NOI of $1,321 against debt service of $6,835, a coverage of 0.19x. Summer pricing below $280 and pool-season marketing to the Los Angeles drive market are the operating answer; the reserve is the credit answer.

With revenue scaled proportionally, the restructured project covers debt service at 43.1% occupancy and reaches 1.25x at 46.9%, against 47.4% modelled and 44.9 to 53 percent in the market depending on vendor. As proposed, break-even is 88.5%.

All rows start from the restructured base unless labelled otherwise.

ADR and occupancy are the binding variables: the market's own trailing-year ADR decline takes year-3 coverage to 0.91x, five points of occupancy to 0.94x, and third-party management at 20 percent to 0.26x, which is why the case assumes owner operation and a small loan. The lender's 75 percent loan-to-cost row is the one to read twice: it is approvable on a PITIA test at 1.19x and covered 0.39x on a full-cost basis.

Residential STR homes are valued by sales comparison, not by capitalized NOI, and that is the second structural problem with a build-to-rent STR community: a new design home at $783,212 all in sits far above a market whose September 2026 median sale was $424,900 at $336 per sq ft, so the lender's appraisal, not the pro forma, would cut the loan.

The restructured NOI yield of 2.5% is below the 7.50 percent note rate, which is the arithmetic reason the loan must be small: negative leverage on any debt above the sized amount.

Prepared by Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute. Model case prepared under USPAP discipline. MMCG Invest, LLC, 27 Maiden Lane, Suite 625, San Francisco, CA 94108.