It is no secret California’s real estate market is one of the most lucrative and most profitable in the country and as a result, housing prices are projected to keep growing without question.
Considered the 6th largest economy in the country, California is the target of every real estate investor looking to capitalize on the best profitable rental properties for the highest financial returns- from Los Angeles, San Diego, Sacramento to the San Jose real estate market. This cutthroat competition has caused a huge spike in the housing prices, making it less and less affordable to buy traditional and/or Airbnb rental properties in the California real estate market. For the purpose of this blog post, we will zoom in on the San Jose real estate market and decipher the best neighborhoods for real estate investing for 2018.
Related: What Make for the Best Place to Invest in Real Estate?
An Airbnb Rental Strategy in the San Jose Real Estate Market
Ranked as the third fastest moving market, the San Jose real estate market has a major startup hub and is the home of giant tech companies such as PayPal and Adobe, which has immensely contributed to the rising housing demand in the area. This tech city has become one of the most competitive real estate markets across the US, with the majority of homes being sold above their listing price. According to Mansion Global, the San Jose real estate market had the largest price growth back in March, increasing to 32.3% year-over-year to $1,263,500.
Real estate investors may complain and stress about the hefty price tags on rental properties in San Jose and greater California but just to stay on the safe side, we highly recommend investors choose a short term rental strategy in 2018 and buy an Airbnb rental property if they have their eyes set on the San Jose real estate market.
A traditional buy and hold rental property in the San Jose real estate market is a much riskier venture than an Airbnb rental strategy. Why you may ask? Well, what goes up, must come down and with the rapid spike in housing prices, you put yourself at risk of losing a lot more than you bargained for. Long story short, if you plan on investing for only a couple of years in California and/or the San Jose real estate market, now is a great time to invest in real estate properties.
Related: California Housing Market 2018 Forecast: What’s the Deal?
The Best Places to Invest in San Jose Real Estate Market
Here is a list of the best places to buy rental property in San Jose real estate based on Mashvisor analytics and our investment property calculator. Our rental property calculator and analytical tools allow real estate investors to make faster and smarter decisions in less time. This entails: choosing the right neighborhoods for real estate investing, pinpointing positive cash flow properties across the country, and capitalizing on profitable real estate investments via key metrics- cap rate, cash on cash return, rental income, rental expenses, and average occupancy rates for traditional rentals and Airbnb rentals.
To make money in real estate, it starts with having an understanding of the macro conditions before honing in on the rental property (micro). With this said, keep in mind that location dictates different real estate strategies and for San Jose, buying vacation homes and renting them out during the year is the most feasible business decision for all real estate investors out there.
1. North San Jose
- Median House Price: $942,745
- Monthly Airbnb Rental Income: $4,065
- Monthly Traditional Rental Income: $3,306
- Airbnb Cash on Cash Return: 0.8%
- Traditional Cash on Cash Return: 2.1%
- Airbnb Cap Rate: 0.8%
- Traditional Cap Rate: 2.1%
- Airbnb Occupancy Rate: 56.69%
2. Downtown
- Median House Price: $933,412
- Monthly Airbnb Rental Income: $3,368
- Monthly Traditional Rental Income: $2,961
- Airbnb Cash on Cash Return: 0.7%
- Traditional Cash on Cash Return: 0.7%
- Airbnb Cap Rate: 0.7%
- Traditional Cap Rate: 0.7%
- Airbnb Occupancy Rate: 60.85%
3. Berryessa
- Median House Price: $1,216,847
- Monthly Airbnb Rental Income: $3,795
- Monthly Traditional Rental Income: $2,714
- Airbnb Cash on Cash Return: 0.79%
- Traditional Cash on Cash Return: 0.92%
- Airbnb Cap Rate: 0.79%
- Traditional Cap Rate: 0.92%
- Airbnb Occupancy Rate: 59.1%
4. North Valley
- Median House Price: $858,772
- Monthly Airbnb Rental Income: $4,049
- Monthly Traditional Rental Income: $2,791
- Airbnb Cash on Cash Return: 1.76%
- Traditional Cash on Cash Return: 0.89%
- Airbnb Cap Rate: 1.76%
- Traditional Cap Rate: 0.89%
- Airbnb Occupancy Rate: 65.59%
If you still prefer a traditional buy and hold real estate investment, the following are neighborhoods in San Jose where the optimal rental strategy is the traditional strategy:
1. Fairgrounds
- Median House Price: $673,988
- Monthly Traditional Rental Income: $2,658
- Traditional Cash on Cash Return: 2.11%
- Traditional Cap Rate: 2.11%
2. Alum Rock-East Foothills
- Median House Price: $865,745
- Monthly Traditional Rental Income: $2,906
- Traditional Cash on Cash Return: 0.89%
- Traditional Cap Rate: 0.89%
3. Blossom Valley
- Median House Price: $841,817
- Monthly Traditional Rental Income: $2,826
- Traditional Cash on Cash Return:0.79%
- Traditional Cap Rate: 0.79%
This is a neighborhood where the optimal rental strategy is Airbnb:
1. Willow Glen
- Median House Price: $1,641,560
- Monthly Airbnb Rental Income: $5,137
- Airbnb Cash on Cash Return: 0.98%
- Airbnb Cap Rate: 0.98%
- Airbnb Occupancy Rate: 64.53%
Related: What Are the Most Popular Airbnb Cities in the US in 2018?
Conclusion
The best real estate investments begin with understanding the market dynamic, the macro and micro conditions, and conducting the right market and property analysis to guarantee a high return on investment, respective to city and neighborhood. If you are looking for the best positive cash flow properties in the San Jose real estate market, turn to Mashvisor.com to help turn your investments into major profits.
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