Investing With Coastal Short‑Term Rentals in Manhattan Beach

Thinking about buying a beach home that pays for itself when you are not using it? In Manhattan Beach, short‑term rentals can be a smart way to blend lifestyle and income. The rules are specific, the costs are real, and the upside depends on location and execution. This guide gives you the legal basics, expected returns, financing tips, and a step‑by‑step path to launch with confidence. Let’s dive in.

The quick legal picture

In Manhattan Beach, short‑term rentals are only allowed inside the City’s Coastal Zone. A 2022 California Court of Appeal decision, Keen v. City of Manhattan Beach, limited the City’s ability to enforce its prior ban in the Coastal Zone. Properties outside the Coastal Zone remain subject to the City’s short‑term rental ban. You can review the City’s overview and links to maps on the Manhattan Beach short‑term rental page.

If your property is eligible, you must obtain a City business license and collect the City’s transient occupancy tax. Manhattan Beach’s transient occupancy tax is 14% on stays of 30 days or less. Always check HOA or CC&R rules as many buildings or communities restrict short‑term rentals regardless of City policy.

Where STRs are allowed

Confirm the Coastal Zone

Only parcels inside the Coastal Zone are currently eligible for short‑term rental activity. Use the City’s resources and interactive mapping linked from the short‑term rental page to confirm a specific address.

Follow City rules before listing

You will need a business license and a plan to collect and remit TOT. The City also regulates advertising of illegal rentals and coordinates enforcement with booking platforms, so make sure your listing reflects a legal, permitted operation. Start with the City’s STR guidance and finance pages for current steps.

What returns look like here

Manhattan Beach is a premium coastal market where purchase prices are typically in the low‑to‑mid 3 million dollar range, depending on neighborhood and condition. See current snapshots in the Manhattan Beach market report. High acquisition cost means cap rates tend to be modest compared to many inland vacation markets.

Industry trackers reported stronger 2024–2025 demand for coastal and resort markets, with rising average daily rates and improved occupancy nationally. An April 2025 snapshot showed ADR around $303 at the national level, which signals a healthy travel backdrop even if local results vary by product and season (industry trends overview). Public listings in Manhattan Beach often command premium nightly rates and spell out city taxes and house rules, reflecting both revenue potential and neighborhood expectations. See a representative example of how hosts present pricing and policies on a Manhattan Beach VRBO listing.

Expect peak demand in summer and holidays, with meaningful shoulder‑season bookings in spring and fall. Product positioning matters. Homes that make parking, check‑in, and quiet hours simple tend to perform better and generate fewer complaints.

Costs, taxes, and risk

• Taxes: You must collect and remit the City’s 14% transient occupancy tax on stays of 30 days or less. Keep accurate records for filings.
• Federal tax reporting: Most rental income is taxable, and rules change based on personal use, length of stay, and services provided. Review the IRS guide to residential rentals in Publication 527 and coordinate with a CPA.
• Operating costs: Budget for cleaning, supplies, utilities, insurance, repairs, platform fees, and management. Short turnovers increase labor and wear compared to long‑term rentals.
• Insurance: Standard homeowners policies often exclude short‑term rental activity. Discuss STR‑specific coverage or endorsements and consider umbrella liability. Platform protections are not a full replacement (insurance overview).
• Regulatory change: Coastal jurisdictions across California continue to adjust short‑term rental rules, which can affect supply, permitting, and operations. For context, see recent coastal actions like Monterey County’s changes. Stay current with Manhattan Beach updates.

Step‑by‑step to get started

1. Verify Coastal Zone status for the property using the City’s mapping tools linked from the STR page.
2. Confirm HOA or CC&R permission and any building rules about transient use.
3. Obtain a City business license and set up TOT collection and remittance.
4. Secure STR‑appropriate insurance and set written house rules, occupancy limits, and emergency procedures.
5. Designate a local contact or manager who can respond quickly to neighbors and the City if issues arise.

Financing options to consider

Financing depends on how you plan to use the home.

• Second home: Under Fannie Mae rules, a second home has specific occupancy and control requirements. If you identify rental income, the loan can still be delivered as a second home if you do not use that income to qualify and other conditions are met. Review Fannie Mae’s occupancy types guidance and discuss with your lender.
• Investment property: These loans typically require larger down payments and carry higher rates. Given local price points, many buyers use jumbo or portfolio products.

Community fit and operations

Beach neighborhoods value quiet, cleanliness, and parking discipline. Post clear house rules, including quiet hours and trash schedules, and screen guests for fit. Many local listings model this approach by highlighting rules and taxes upfront, such as the representative VRBO example. Good neighbor policies reduce complaints and protect your operating rights.

Is a Manhattan Beach STR right for you?

A coastal short‑term rental here pairs lifestyle with potential income, but success depends on buying in the right zone, following City requirements, and running a professional operation. If you want a high‑quality beach base with selective renting to offset costs, the Coastal Zone may offer a path. If you need high cash yield, you may prefer other markets or a long‑term strategy.

Ready to map options, compare neighborhoods, and model income against today’s costs and financing? Connect with Gauss Real Estate Group (Alex Gauss) for a tailored plan and property shortlist.

FAQs

Can you legally run a short‑term rental in Manhattan Beach?

• Yes, but only inside the City’s Coastal Zone and only if you follow City rules like business licensing and tax collection. Properties outside the Coastal Zone remain subject to the City’s ban. Start with the City’s STR page and the Keen case summary.

What taxes will guests pay in Manhattan Beach?

• The City’s transient occupancy tax is 14% on stays of 30 days or less, collected from guests and remitted to the City. See the TOT guidance.

How do you confirm a property is in the Coastal Zone?

• Use the City’s resources and interactive GIS linked from the short‑term rental page to check parcel status before you buy or list.

Is standard homeowners insurance enough for a short‑term rental?

• Often not. Many policies limit or exclude business use. Confirm coverage with your carrier, consider STR‑specific or commercial endorsements, and review umbrella liability options (insurance overview).

How does financing work for a vacation home you also rent?

• Lenders classify loans as second home or investment property based on occupancy and control. Review Fannie Mae’s occupancy types and discuss the best structure and down payment with your lender.

What are the biggest risks for coastal STR investors here?

• Regulatory change, HOA restrictions, insurance coverage gaps or cost shifts, and modest initial yields due to high purchase prices. Stay current with City rules and broader coastal actions like recent Monterey County changes.