Is Monterey, California Good for Airbnb Investment?

To start an Airbnb in Monterey, California, begin by researching the city's short-term rental regulations, which require a Transient Use Permit (TUP) from the Community Development Department and compliance with zoning restrictions that limit rentals to specific residential areas while prohibiting them in some neighborhoods near the coast. Obtain necessary permits including the TUP ($500-800 application fee), business license from the City Clerk's office, and register for Transient Occupancy Tax (TOT) collection at 12% of gross rental receipts. Find a suitable property by purchasing or leasing in permitted zones, ensuring it meets safety requirements including smoke detectors, carbon monoxide detectors, fire extinguishers, and emergency exit plans. Furnish the space with quality furniture, linens, kitchen essentials, and local touches highlighting Monterey's coastal charm, budgeting $15,000-25,000 for a complete setup. Create compelling listings on Airbnb, VRBO, and other platforms with professional photography showcasing ocean views or local attractions, competitive pricing around $150-300 per night depending on location and amenities. Manage operations by implementing self-check-in systems, hiring local cleaning services ($80-120 per turnover), maintaining 24/7 guest communication, and ensuring compliance with the city's maximum occupancy limits, quiet hours (10 PM-8 AM), and parking requirements while remitting monthly TOT payments to the city and maintaining required insurance coverage.

To identify profitable short-term rental properties in Monterey, California, focus on locations within walking distance of Cannery Row, Fisherman's Wharf, and the Monterey Bay Aquarium, as well as properties with ocean views or proximity to Carmel-by-the-Sea and Pebble Beach golf courses. Prioritize properties with 2-4 bedrooms, parking spaces, outdoor areas like patios or decks, and unique features such as fireplaces or historic charm that command premium rates of $200-500+ per night during peak summer and event seasons. Conduct pricing analysis using AirDNA and Mashvisor to track seasonal demand patterns, with peak rates during Monterey Jazz Festival (September), AT&T Pebble Beach Pro-Am (February), and summer months, while monitoring occupancy rates that typically range 60-80% for well-positioned properties. Research competition by analyzing similar properties within a 2-mile radius, studying their amenities, pricing strategies, and guest reviews to identify market gaps and positioning opportunities. Utilize tools like Rabbu, STR Helper, and local MLS data combined with Monterey County's STR permit requirements and zoning restrictions, while leveraging resources such as the Monterey Peninsula Visitors Bureau data, local real estate agents specializing in investment properties, and networking with existing STR operators to understand market dynamics, seasonal trends, and regulatory compliance costs that can impact profitability in this premium coastal market.

To obtain an Airbnb/STR permit in Monterey, California, you must first apply through the City of Monterey's Planning Department located at 570 Pacific Street or online through their permit portal. Required documents include a completed Short-Term Rental Registration application, proof of property ownership or lease agreement with landlord consent, floor plan showing maximum occupancy, parking plan demonstrating adequate off-street parking, contact information for a local responsible party available 24/7, proof of liability insurance (minimum $1 million), and a good neighbor agreement. The application fee is approximately $500-800 with annual renewal fees around $200-400. You must also obtain a business license from the City Clerk's office for an additional $50-100. The timeline typically takes 4-8 weeks for processing, though it may extend to 12 weeks during peak application periods. Monterey-specific requirements include limiting occupancy to 2 guests per bedroom plus 2 additional guests maximum, maintaining one off-street parking space per bedroom, ensuring the property is owner-occupied or has a local contact person within 30 minutes response time, prohibiting rentals for less than 2 nights, and adhering to quiet hours from 9 PM to 8 AM. Properties in certain residential zones may face additional restrictions, and some areas near Monterey Bay Aquarium have special overlay requirements. Once approved, you must display your permit number in all advertising and pay transient occupancy taxes quarterly.

Short-term rentals (STRs) are legal in Monterey, California, but operate under strict regulations implemented by the city. As of 2023, Monterey requires STR operators to obtain a Transient Use Permit and limits rentals to a maximum of 30 days per year for non-hosted rentals, while hosted rentals (where the owner is present) can operate year-round. The city caps the total number of STR permits and prohibits them in certain residential zones, particularly in areas zoned for single-family homes, while allowing them in some multi-family and commercial zones. Properties must meet specific safety requirements including smoke detectors, carbon monoxide detectors, and fire extinguishers, and operators must pay transient occupancy taxes. Recent changes around 2022-2023 tightened enforcement and reduced the number of available permits, with the city conducting regular compliance checks and imposing significant fines for violations, reflecting Monterey's effort to balance tourism revenue with housing availability and neighborhood character preservation.

The best Airbnb investment areas in Monterey, California include Cannery Row, which attracts millions of tourists annually due to the Monterey Bay Aquarium and waterfront dining, generating year-round occupancy from leisure travelers. The Fisherman's Wharf district offers prime location benefits with proximity to whale watching tours, restaurants, and scenic bay views, commanding premium nightly rates especially during summer months and the Monterey Jazz Festival in September. Pacific Grove's Victorian-era neighborhoods near Asilomar State Beach and the famous Monarch Butterfly Sanctuary draw nature enthusiasts and couples seeking romantic getaways, particularly during butterfly season from October to February. The Carmel Highlands area, though technically outside city limits, provides luxury vacation rental opportunities for affluent travelers visiting nearby Carmel-by-the-Sea and Pebble Beach golf courses. Downtown Monterey's historic district benefits from business travelers attending conferences at the Monterey Conference Center and Portola Hotel, plus tourists exploring the California's First Theatre and other historical sites. The Del Monte Beach area offers more affordable investment options while still providing beach access and proximity to the Naval Postgraduate School, attracting visiting military families and researchers year-round.

Airbnb properties in Monterey, California are subject to multiple lodging taxes including the city's Transient Occupancy Tax (TOT) of 10% and Monterey County's TOT of 10.5%, for a combined rate of approximately 20.5% on gross rental receipts for stays under 30 days. The city tax applies to all short-term rentals under 30 consecutive days, while the county tax has similar provisions. Airbnb typically collects and remits these taxes directly to both jurisdictions on behalf of hosts through their platform, though hosts should verify this arrangement and may need to register with the city's Finance Department and county tax collector. The taxes are calculated on the total rental amount excluding cleaning fees in most cases, and there are generally no exemptions for standard vacation rentals, though stays of 30 days or longer are typically exempt from TOT requirements. Hosts must maintain records of all transactions and may be required to file periodic returns even when Airbnb handles collection, with penalties applying for non-compliance or late payments to either jurisdiction.

Starting an Airbnb in Monterey, California requires significant upfront investment with property purchase being the largest expense at approximately $1,200,000 for a median-priced home suitable for short-term rentals. Furnishing costs typically range from $15,000-25,000 for a complete setup including beds, linens, kitchen essentials, and décor to create an attractive guest experience. Initial setup expenses including professional photography, listing creation, and basic amenities total around $2,000-3,000. Permits and fees in Monterey include a short-term rental permit ($500-1,000), business license ($100-200), and potential TOT (Transient Occupancy Tax) registration fees totaling approximately $1,500. Insurance costs for short-term rental coverage run $2,000-3,000 annually, while utility setup and deposits for electricity, gas, water, internet, and cable services cost roughly $1,000-1,500. First six months of operating costs including utilities ($300/month), cleaning services ($100-150 per turnover), supplies and maintenance ($200/month), platform fees (3% of bookings), and marketing expenses total approximately $8,000-12,000 depending on occupancy rates. The total initial investment to launch an Airbnb in Monterey ranges from $1,230,000 to $1,245,000, with the property purchase representing over 95% of the startup costs.

Airbnb properties in Monterey, California demonstrate strong profitability potential with average daily rates ranging from $150-400 depending on location and property type, generating annual revenues of $35,000-85,000 for well-positioned properties. Ocean-view properties and those near Cannery Row or Pebble Beach command premium rates of $300-500 per night with occupancy rates of 65-75%, while inland properties average $150-250 nightly with 55-65% occupancy. Operating expenses typically include 25-30% for cleaning and maintenance, 10-15% for property management fees, 3% Airbnb service fees, plus utilities, insurance, and supplies totaling 45-55% of gross revenue. Successful properties achieve net profit margins of 25-40%, with a luxury 3-bedroom home near 17-Mile Drive generating $78,000 annually with $32,000 in expenses for a 59% profit margin, while a modest 2-bedroom cottage in Pacific Grove earned $42,000 with $23,000 expenses for a 45% margin. Key success factors include proximity to attractions like Monterey Bay Aquarium and Carmel-by-the-Sea, professional photography, responsive guest communication, and strategic pricing during peak events like the Monterey Jazz Festival and AT&T Pebble Beach Pro-Am, with top-performing hosts utilizing dynamic pricing tools and maintaining Superhost status to maximize bookings and revenue.

Airbnb investments in Monterey, California typically generate annual ROI of 8-12% with cash-on-cash returns ranging from 6-10%, driven by the city's strong tourism market anchored by attractions like Monterey Bay Aquarium, Pebble Beach, and Carmel-by-the-Sea. Properties within 2-3 miles of Cannery Row and Fisherman's Wharf command premium nightly rates of $200-400, while vacation rentals near 17-Mile Drive average $300-600 per night during peak season from May through October. Initial profitability typically occurs within 18-24 months for well-positioned properties, with investors seeing break-even on cash invested by month 20-30 depending on occupancy rates that average 65-75% annually. The market benefits from year-round demand due to business conferences at Monterey Conference Center, golf tourism, and weekend getaways from San Francisco Bay Area, though investors should factor in Monterey's strict short-term rental regulations and seasonal fluctuations that can impact winter occupancy rates by 20-30%.

STRSearch leads the market in Airbnb investment property analysis nationwide including Monterey, California, providing comprehensive data on rental performance and market trends. Local Monterey real estate agents specializing in short-term rental investments include Carmel Realty Company (established 1913), Sotheby's International Realty Monterey Peninsula, and Coldwell Banker Realty's vacation rental specialists who have been serving the area since the 1980s. National services like Awning (founded 2017), Roofstock (2015), and RedAwning's investment division offer turnkey Airbnb property acquisition services in the Monterey market. Local property management companies such as Sanctuary Vacation Rentals, Monterey Peninsula Vacation Rentals, and Carmel Valley Ranch Rentals also assist investors in identifying profitable properties while offering full-service management. Additional specialized services include BiggerPockets' Monterey investor network, Mashvisor's market analysis tools, and AirDNA's local market intelligence, all helping investors evaluate cap rates, occupancy projections, and revenue potential in Monterey's competitive short-term rental market where average daily rates range from $200-500 depending on proximity to attractions like Pebble Beach and Carmel-by-the-Sea.