Every successful real estate investor is aware that the location of the investment property is the most important factor to take into account before buying the property. Property investors are always looking for the best places to invest in real estate that offer profitable investment properties and guarantee a good return on investment.
The State of California is one of the best real estate markets for both long-term and short-term real estate investments. The Golden State has not only provided huge wealth growth for property investors over the last 40 years, but it also has unique characteristics that make it appealing to any real estate investor. For these reasons, savvy property investors consider the California real estate market as a strategic place to add to their real estate investment portfolio. Even foreigner investors pick California over other states!
Keep reading to learn more on why you should consider the California real estate market to buy a rental property in 2018, which cities offer the most profitable investment properties, and how to find the best rental property in just 15 minutes with the help of Mashvisor!
To learn about how we help property investors make faster and smarter real estate investment decisions, click here.
Why Invest in California Real Estate Market 2018
High Number of Renters
California has the largest population in the USA with a population of over 39 million. People from all over the nation are trying to wiggle their way into the Golden State. And can you blame them? With its pleasant weather all year-round, beautiful beaches and lifestyle, both residents and travelers have their eyes set on California. Thus, the California real estate market offers great investment opportunities for both traditional and Airbnb rental property investors.
Savvy property investors use the price-to-rent ratio to further prove this point. Cities with high price-to-rent ratio are generally more attractive to renters than home buyers. As a result, property investors will notice a higher demand for rental properties in these cities. The cities included in our ranking all have a price-to-rent ratio of over 21 (which means that it’s definitely better to rent a property rather than buy a home). These make the best places to buy a rental property in the California real estate market.
Related: The Best Real Estate Markets to Invest in the US for Price to Rent Ratio
Strong Local Economy
California’s local economy is another reason why the city’s population keeps increasing. California is a conducive business environment, meaning it offers new job opportunities leading to economic growth and low unemployment rates. This is a good sign for a real estate investor as it means more and more people who are able to pay rent are moving into the California real estate market.
California’s local economy is also supported by the city’s thriving tourism industry. The California real estate market is home to a number of cities that are among the top tourists’ destinations in the US, including Los Angeles, San Diego, and San Francisco. With so many attractions, natural playgrounds and world-famous dramatic landscapes, it is no wonder that California attracts millions of visitors from all over the globe. Last year alone, travelers and tourists in California spent over $126 billion and the tourism industry created over 1.1 million new jobs!
Therefore, the California real estate market is an excellent option for a real estate investor whose preferred rental strategy is short-term Airbnb rentals. You’ll notice below that our top 5 cities in the California real estate market all offer an attractive rental income for both traditional and Airbnb rental properties.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
Where to Buy Rental Property in California Real Estate Market
Here are the top 5 cities in California where a real estate investor should look into buying a rental property based on data analysis provided to you by Mashvisor’s rental property calculator. To learn more about our product, click here.
#4 Oakland
Oakland is attracting people under the age of 35 – which is driving rental prices up, making the city look good for California real estate market property investors. One reason that Oakland is a top city for rental properties is its location – nestled on the east side of San Francisco Bay. Since San Francisco is much more expensive, a lot of renters are looking to Oakland for affordability.
- Median Property Price: $854,471
- Traditional Rental Income: $3,248
- Airbnb Rental Income: $2,018
- Traditional Cash on Cash Return: 0.99%
- Airbnb Cash on Cash Return: 0.39%
- Traditional Cap Rate: 0.99%
- Airbnb Cap Rate: 0.39%
- Price-to-Rent Ratio: 38.5
Click here to start searching for and analyzing investment properties in Oakland!
#3 Sacramento
As one of the most historic cities in California, Sacramento has a lot to offer renters – making it attractive to rental property investors. With plenty of employment opportunities and lots of universities nearby, Sacramento is one of the best cities to invest in rental properties, as there are plenty of renters looking for more affordable housing.
- Median Property Price: $367,152
- Traditional Rental Income: $1,404
- Airbnb Rental Income: $1,777
- Traditional Cash on Cash Return: 1.02%
- Airbnb Cash on Cash Return: 1.79%
- Traditional Cap Rate: 1.02%
- Airbnb Cap Rate: 1.79%
- Price-to-Rent Ratio: 24.26
Click here to start searching for and analyzing investment properties in Sacramento!
#2 Bakersfield
Located in the San Joaquin Valley of California, Bakersfield is a diverse city offering plenty of job opportunities. Moreover, home prices have been rising and, with the help of foreclosures, there’s a higher demand for rental properties in the city, making it one of the best in the California real estate market!
- Median Property Price: $308,307
- Traditional Rental Income: $1,231
- Airbnb Rental Income: $1,424
- Traditional Cash on Cash Return: 1.38%
- Airbnb Cash on Cash Return: 1.2%
- Traditional Cap Rate: 1.38%
- Airbnb Cap Rate: 1.2%
- Price-to-Rent Ratio: 22.51
Click here to start searching for and analyzing investment properties in Bakersfield!
#1 San Francisco
When it comes to the California real estate market, San Francisco is what most property investors think about first. The City by the Bay is an ideal location for both traditional and Airbnb rental properties. However, it’s also among the most expensive cities in the US, and property prices continue to increase while inventory is low. It, therefore, comes to no surprise that real estate investing is not the easiest in San Francisco, but it definitely pays off in the return an investor receives, which is why it tops our list.
- Median Property Price: $1,455,451
- Traditional Rental Income: $4,394
- Airbnb Rental Income: $5,061
- Traditional Cash on Cash Return: 1.2%
- Airbnb Cash on Cash Return: 1.82%
- Traditional Cap Rate: 1.2%
- Airbnb Cap Rate: 1.82%
- Price-to-Rent Ratio: 45.9
Click here to start searching for and analyzing investment properties in San Francisco!
Find the Best Rental Property in California Real Estate Market
We understand the difficulties real estate investors face while searching for the right investment property, and we offer the solution! Mashvisor helps property investors find the best investment properties in any city or neighborhood based on data analysis and real estate analytics. To find the best investment properties in any city in the California real estate market, make use of our:
- Investment Property Finder: A powerful and heavily customizable search tool that allows you to search for rental properties based on specific criteria using different filters, such as finding rental properties of a certain price range, in a certain neighborhood, or with a certain cap rate. This will help you easily compare different investment properties in the same location to determine which one will yield a better return on investment.
- Investment Property Calculator: A versatile tool that allows you to calculate the different values related to an investment property, including the cash on cash return, cap rate, cash flow, and occupancy rate (for both traditional and short-term Airbnb investment). This will help you evaluate the profitability of buying rental property.
- Heat Map Function: The heat map function for the property finder tool allows you to find rental properties much faster using visual cues. For example, you can set the heat map to indicate the areas with the highest cash on cash return, and the heat map will highlight which areas are hot or cold for this feature. This will make it easier to compare different neighborhoods and see which one has more profitability for real estate investing.
Related: Mashvisor: A Real Estate Investing Tool for All Your Investment Needs
Final Words
Over the years, the California real estate market continued to be one of the top places for real estate investing. The above-mentioned cities are where a real estate investor will find the best rental properties in 2018. Remember to sign up with Mashvisor to start your search for a rental property in any of these cities and find the best one in just 15 minutes!
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.