The California real estate market offers a wide range of opportunities for anyone who wants to buy a rental property
investment. With a population of 39.3 million, California is the most populous state in the US. Its economy consists of a wide range of industries including entertainment, agriculture, finance, health, manufacturing, and technology. It is home to Hollywood, the largest and oldest film industry in the world. The state is also home to the world-renowned Silicon Valley. With its moderate weather and scenic landscapes, California continues to attract local and international travelers all year round. If you’ve been thinking about buying a California investment property or looking for the best places to invest in California, this guide is for you.
Related: 6 Most Affordable Cities in California for Real Estate Investing
Is the California real estate market a good place to invest?
Before we look at the best places to invest in California, let us consider some reasons why buying investment property in California is a good idea:
- Strong job market – Many Fortune 500 companies such as Chevron, Safeway, Apple, Walt Disney, Intel, Oracle, Google, Visa, and Yahoo are headquartered in California. With the high employment rate, there will always be a demand for houses for rent in California.
- Low property taxes – Kiplinger.com lists California among the top 10 most tax friendly states in the US. Though property taxes are very high in Silicon Valley and other areas, the state’s overall property taxes are below average. For each $100,000 of assessed home value, the median property tax rate is $729. Low property taxes mean that real estate investors can enjoy a higher return on investment.
- High rental demand – With huge numbers of people flocking to California for jobs, outdoor activities, great entertainment, and favorable weather, demand for rental properties remains high. Though the local market experienced a slump due to the Coronavirus pandemic, the economy is now on an upward trend.
- Increasing home values – In a recent California Housing Market Forecast, the California Association of Realtors (CAR) predicts that the median home price will increase by 1.3% to $648,760 in 2021. With the low inventory levels, it is expected that the local housing market will remain a seller’s market into 2022.
Effects of COVID-19
Just like any other state, the California real estate market was severely affected by the Coronavirus pandemic. A poll conducted by the CAR in March 2020 revealed that 54% of buyers backed out of purchasing a home due to the virus. During the same period, 45% of sellers backed out of selling their properties. The statewide ‘stay at home’ and social distancing orders made it difficult for realtors to take photos of California houses for sale or arrange open houses. Many realtors had to settle for virtual showings of homes, whether via drone or cell phone video.
The full impact of COVID-19 was felt in May when California home sales dropped to the lowest level since the great recession. As housing demand fell, the prices of homes in California also dropped drastically. However, the housing market started rebounding in June. With the release of the Coronavirus vaccine, the California real estate market is expected to recover fully in 2021.
Related: Covid-19 Vaccine to Drive Airbnb Occupancy Rate Recovery in September 2021
Best places to invest in real estate in California
California is a very lucrative market for both traditional and Airbnb investment. Finding the best places to invest in California is easy with Mashvisor.
Based on Mashvisor’s cash on cash return real estate data, here are the cities where you can find the best investment property in California:
Best locations to invest in traditional rental property
#1. Citrus Heights, California
- Median Property Price: $322,467
- Price per Square Foot: $248
- Price to Rent Ratio: 14
- Monthly Traditional Rental Income: $1,985
- Traditional Cash on Cash Return: 4.64%
#2. Bishop, California
Bishop Is One of the Best Places to Invest in Traditional Rentals in California in 2021
- Median Property Price: $484,200
- Price per Square Foot: $242
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $4,065
- Traditional Cash on Cash Return: 4.46%
#3. Quincy, California
- Median Property Price: $323,971
- Price per Square Foot: $206
- Price to Rent Ratio: 14
- Monthly Traditional Rental Income: $1,877
- Traditional Cash on Cash Return: 4.37%
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
#4. Cathedral City, California
- Median Property Price: $445,122
- Price per Square Foot: $234
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $2,533
- Traditional Cash on Cash Return: 4.17%
#5. Taft, California
- Median Property Price: $175,204
- Price per Square Foot: $112
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $2,535
- Traditional Cash on Cash Return: 4.17%
#6. Novato, California
- Median Property Price: $847,000
- Price per Square Foot: $559
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $4,162
- Traditional Cash on Cash Return: 4.17%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Best locations to invest in Airbnb rental property
#1. Riverside, California
- Median Property Price: $542,633
- Price per Square Foot: $308
- Average Airbnb Daily Rate: $156
- Monthly Airbnb Rental Income: $4,467
- Airbnb Cash on Cash Return: 5.69%
- Airbnb Occupancy Rate: 67%
#2. West Sacramento, California
- Median Property Price: $448,914
- Price per Square Foot: $288
- Average Airbnb Daily Rate: $138
- Monthly Airbnb Rental Income: $3,268
- Airbnb Cash on Cash Return: 5.49%
- Airbnb Occupancy Rate: 76%
Related: Airbnb Occupancy Rate by City in California
#3. Bakersfield, California
- Median Property Price: $380,973
- Price per Square Foot: $186
- Average Airbnb Daily Rate: $135
- Monthly Airbnb Rental Income: $3,016
- Airbnb Cash on Cash Return: 5.46%
- Airbnb Occupancy Rate: 74%
#4. Roseville, California
- Median Property Price: $518,211
- Price per Square Foot: $270
- Average Airbnb Daily Rate: $161
- Monthly Airbnb Rental Income: $3,751
- Airbnb Cash on Cash Return: 5.43%
- Airbnb Occupancy Rate: 84%
#5. Visalia, California
- Median Property Price: $394,158
- Price per Square Foot: $183
- Average Airbnb Daily Rate: $84
- Monthly Airbnb Rental Income: $2,697
- Airbnb Cash on Cash Return: 5.27%
- Airbnb Occupancy Rate: 78%
#6. National City, California
- Median Property Price: $572,919
- Price per Square Foot: $390
- Average Airbnb Daily Rate: $161
- Monthly Airbnb Rental Income: $4,702
- Airbnb Cash on Cash Return: 5.21%
- Airbnb Occupancy Rate: 64%
Savvy real estate investors should keep in mind that Airbnb California faces some of the most strict short-term rental regulations. For example, Airbnb Los Angeles and Airbnb San Diego are illegal for non-owner occupied properties. Thus, they should conduct careful research on the local Airbnb laws and restrictions before buying a property to rent out on a short-term basis.
Conclusion
These are the best places to invest in California according to Mashvisor’s real estate data analysis. If you do your due diligence when looking for California investment property, you will identify the best places to buy rental property within these markets. Don’t forget to use Mashvisor’s investment property calculator to conduct real estate market analysis as well as investment property analysis. Buying a house in California to rent out traditionally or on Airbnb should be relatively stress-free with the right real estate investment tools.
To start looking for affordable cities in California and the best real estate investments, sign up for Mashvisor now and get 15% off.
