San Diego Yields 3.5% on Long-Term Rental, with Short-Term Rental Capped

San Diego (San Diego County): A Premium Market Where Yield Is the Trade-Off

San Diego (San Diego County) is a textbook premium coastal market, where investors accept thin running yields in exchange for location value, demographic tailwinds, and long-run appreciation. At a median 3-bed sale price of about $1.17m and median rent of about $2,900, the city's long-term gross yield of 3.5% sits below the national median of 5.3% and below the California state median of 4.0%. The reader's question is the right one: will appreciation make up for the gap?

The short answer is that this is not a cash-flow market. It is a coastal Southern California land play. Long-term rental does not stretch the mortgage comfortably, and the 6.4% short-term rental gross yield, while higher, is largely off-limits to investors thanks to San Diego's 2022 ordinance restricting whole-home short-term stays to primary residences in most zones. Mission Beach has a small grandfathered tier; almost everything else has been phased out for non-owner-occupied operators.

⚠ Short-term rental figures apply only where legally permitted. San Diego's 2022 ordinance restricts whole-home short-term stays to primary residences in most zones, with a grandfathered tier in Mission Beach. The figures below describe the market for properties that qualify; most investor-owned properties cannot legally operate this way.

Estimates for a typical 3-bedroom house. Figures are modelled from market data; not guaranteed outcomes.

Where short-term rental is legally permitted, gross revenue runs roughly 83% higher than long-term rent. After San Diego's higher operating costs (platform fees, insurance, utilities, furnishing replacement), the running-yield gap narrows. For investors who cannot legally operate short-term stays, long-term rental is the only realistic path.

Break-Even Occupancy

Short-term rental only outperforms long-term lease on gross revenue if occupancy exceeds 28%. Below that, the long-term tenant wins on revenue alone, before even accounting for short-term rental's heavier cost structure. The market average sits at 50%, comfortably above the break-even threshold, but San Diego's coastal submarkets vary widely between summer tourist concentrations and quieter inland zones.

Occupancy Sensitivity

Occupancy is the single biggest variable in short-term rental returns. Long-term rental income is essentially fixed once tenanted, but short-term rental income swings sharply with occupancy. At a softer 35% occupancy, the same San Diego 3-bedroom house grosses approximately $43,000; at a stronger 60%, it grosses approximately $73,000. The ceiling at 100% occupancy is about $121,000. The reader's specific submarket and execution determine where on this curve they land, which is exactly what the dashboard helps model.

San Diego Suburb-Level Yields Diverge Sharply From the City Median

San Diego's headline 3.5% city-wide yield masks a wide spread across the 114 ZIP codes in the county. Inland and southern ZIPs run higher yields than the coastal premium areas, because rent does not scale with sale price as steeply as land value does as you move toward the coast.

Top yielding ZIP codes within San Diego County (3-bed houses, long-term lease).

The top-ranked ZIP, San Diego (92115), returns roughly 6.0%, well above the city median and inside the range investors typically need to cover a 30-year mortgage with a healthy buffer. By contrast, premium coastal pockets like La Jolla, Coronado, Del Mar, and Solana Beach trade at multi-million-dollar medians where rent simply does not keep pace with capital values; the yield gap is the cost of being on the water. These are averages per suburb. Per-suburb figures vary further by bedroom count and property type, the dashboard shows the breakdown for your specific property.

View San Diego in the dashboard → Free preview · every bedroom count and property type

Operating Costs Eat Roughly Two-Thirds of Long-Term Rental Income in San Diego

San Diego's running cost stack is heavy by national standards, driven by California property tax, premium insurance, and high cost-of-labour maintenance. For a typical 3-bedroom house priced at about $1.17m and let on a long-term rental at about $2,900/month (about $33,000/year), default operating costs sum to approximately $22,000, leaving roughly $11,000 of net operating income before mortgage. That is a net yield of 1.2% on the asset value.

The default long-term rental cost lines, all included in that total, are: property tax of approximately $11,000 per year (at California's statutory new-buyer Proposition 13 reset rate (rounded to 1.2%)), landlord insurance of approximately $1,900, and maintenance of approximately $9,300. The dashboard defaults long-term lease to self-managed, so no agent fee is included; if you choose to hire a property manager instead, expect to add roughly 10% of gross rent.

Short-term rental is a different cost profile entirely. Where legally permitted, total operating costs run approximately $49,000, against gross revenue of about $61,000, leaving roughly $12,000 net and a net yield of 1.3%. Cost lines include Airbnb host fees of approximately $9,500 (at the U.S. host-only service-fee rate of 15.5%, with no separate guest service fee on the booking), short-term-specific insurance of approximately $3,400, higher maintenance reflecting guest turnover and furnishing replacement, utilities of approximately $4,800, the 1.2% property tax, and the local Transient Occupancy Tax of 12.0% (collected by platforms but a real cost on the gross revenue line). Upfront furnishing of approximately $20,000 is a one-time capital outlay before year one.

Short-term rental management is excluded from these defaults; the dashboard assumes self-managed. If you outsource to a short-term rental management company, expect to add around 23% of gross revenue, which on this property is roughly $14,000 per year. That converts the 1.3% net yield into something closer to break-even on running cash flow.

Tax Implications for San Diego Investors

The single most important tax line for a San Diego investor is depreciation. On the U.S. 27.5-year residential schedule, the depreciable building portion of approximately $665,000 (around 70% of the median sale price, with land excluded) generates an annual deduction of approximately $24,000. That is large enough to convert most of the long-term rental net operating income into a paper loss for tax purposes, despite the property generating positive cash flow.

Mortgage interest is fully deductible on Schedule E without the $750,000 acquisition-debt cap that limits primary residence interest deduction. California state income tax, however, does apply: the state's top marginal rate is among the highest in the country, so high-income investors pay both federal and California tax on net rental income. Material participation in a short-term rental operation (where average guest stay is under 7 days and the owner provides substantial services) can sometimes shift the activity from passive to non-passive for federal purposes, allowing losses to offset W-2 income; this is a fact-specific test and worth running past a CPA before relying on it. A 1031 exchange remains available for swapping into another investment property on a tax-deferred basis when the time comes to exit.

San Diego Sits Well Above State and National Medians on Price, Below on Yield

Comparison of key investment metrics.

San Diego's median 3-bed price of about $1.17m is well above the California state median of about $687,000 and several multiples of the national median of about $243,000. Rents are higher in absolute terms but do not scale proportionally, which is why the long-term gross yield of 3.5% sits below both the California state median of 4.0% and the national median of 5.3%. This is the trade-off premium markets make: investors here are paying for location quality, supply constraint, and the appreciation track record, not running yield.

Long-Term Appreciation Outlook: Why Investors Accept the Yield Gap

The case for buying in San Diego despite a 3.5% gross yield rests on three structural factors: severe coastal supply constraint, persistent net in-migration of high-earning households (biotech, defense, tech), and a regulatory regime on new construction that has historically lagged demand. Investors here have generally been paid through capital growth and tenant rent escalations over multi-year holds, not through year-one cash flow.

The risk to this thesis is that California's higher property tax for new buyers (the 1.2% Proposition 13 reset rate, well above the stock-median rate paid by long-tenured owners) plus high state income tax compresses net cash flow further than headline yields suggest. An investor who is leveraged at 70-80% on a $1.17m purchase will likely be modestly cash-flow negative on long-term lease in year one and rely on rent growth and amortisation to break even on running costs over time. The premium-market thesis only works if appreciation continues; at current rates, there is no margin of safety in the operating numbers themselves.

Investment Bottom Line

San Diego is a hold-for-appreciation market, not a cash-flow market. Long-term rental at 3.5% gross and 1.2% net is the realistic strategy for almost all investors, given that the 2022 short-term rental ordinance has effectively closed off non-owner-occupied short-term stays in most of the city. Suburb selection matters more than strategy selection here: the spread from 6.0% in San Diego (92115) down to the low-2% range in coastal premium ZIPs is wider than any short-term-vs-long-term cost difference an investor could engineer.

For a methodology refresher, see the market score methodology and data sources. Investors evaluating other premium California markets may want to review After All Costs, Oakland's Airbnb Premium Shrinks Sharply, California Rental Investment Insights, Apartments Outyield Houses in Los Angeles Before HOA Fees, or After All Costs, San Jose's 47% Airbnb Premium Disappears for comparison. Closing costs and transfer taxes apply on purchase; check current rates with your real estate attorney or escrow officer before modelling a specific deal.

Data reflects market conditions as of May 2026.

This information is for educational purposes only and should not be considered financial or legal advice. Regulations and market conditions change frequently. Verify current rules with local authorities before making investment decisions.