10 Best Places to Invest in California in 2020

Every real estate investor in the US knows that the California housing market is one of the toughest to break into. However, California is also known to be one of the best states to invest in real estate in 2020 when it comes to both long-term and short-term rental investments. For many years, the real estate market in the Golden State has provided wealth for investors and it still has great investment opportunities to offer in 2020. You just need to know where to find them. To help you out, we created this list of the best places to invest in California in 2020 based on Mashvisor’s real estate analytics and market research. To find out why and where to invest in California income properties this year, keep reading!

California Housing Market 2020 Trends

For any investor looking for success when investing in real estate, researching and studying the current trends and future predictions of his/her target housing market is a must. You should make sure that buying rental property is a sound investment decision that’ll yield a good ROI before you even start searching for homes for sale in that market. Below, we provide a glimpse of how the California real estate market is performing right now before we go on to our list of the best places to buy rental property in California in 2020.

1) Home Prices Have Increased

It doesn’t come as a surprise to see that California house prices continue to rise. According to the 2020 California Housing Market Forecast published by the California Association of Realtors, median prices of homes for sale in the Golden State were at an all-time high during August of 2019. As of right now, Mashvisor’s real estate data and analytics show that the median home price in the California real estate market is $718,718 ($384 price/square foot). We can attribute the increase in California home prices to the tight inventory and increasing demand for housing.

When there are many potential buyers in the market but there aren’t enough homes for sale, this naturally causes some fierce competition which leads to increasing home prices. Consequently, when prices go up, this widens the affordability gap for first-time buyers and weakens home sales. This is another California housing market trend that C.A.R. has reported in their forecast, stating that home sales across the state have dipped slightly but remain above 400K.

After reading about this market trend, a beginner real estate investor will probably think it’s best to avoid investing in California real estate. However, this should actually encourage you to buy a California rental property now! Increasing house prices is a sign of a strong housing market and upward growth in home values for years to come. In addition, while affordability is an issue for first-time buyers, savvy California real estate investors know how to find properties for sale that they can afford to buy and turn into highly-demanded rentals.

Don’t let tight inventory and high prices stop you from finding a California investment property in 2020! Start your property search with Mashvisor to find affordable and profitable real estate investments in the best places to invest in California before prices become too expensive.

Search for My Investment Property

2) Mortgage Rates Remain Low

This is another reason to invest in California real estate. According to the California Association of Realtors, low mortgage interest rates will support California’s housing market in 2020. Mortgage interest rates are expected to remain near 3-year lows, giving California real estate investors the motivation and purchasing power they need to enter the housing market in 2020. C.A.R. reported that the average for 30-year, fixed mortgage interest rates will dip to 3.7% in 2020, down from 3.9% in 2019 and 4.5% in 2018 and will remain low by historical standards. Not only that, but mortgage payments have continued to drop and are now at their lowest in 34 months. So if you’re thinking of financing your California rental property with a mortgage, now is a good time to take out a mortgage loan for real estate investing.

best places to invest in California - interest rate

Source: California Association of Realtors

3) Economic Fundamentals Remain Solid

Regardless of high property prices, California is still one of the best states to invest in real estate in 2020 because it is backed by a strong economy – the strongest in the nation, as a matter of fact. California still creates and offers many job opportunities, which naturally leads to growth in employment. According to the 2020 California Housing Market Forecast, unemployment in California is at its lowest rate in 50 years! This is also expected to affect the state’s population as more young professionals are moving to California to score better jobs. As the economy continues to grow, so does the demand for housing in many of the best cities in California. So why wait? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!

Best Places to Invest in California Traditional Rentals

When thinking of investing in California real estate, many first think of investing in traditional long-term rentals. Since most first-time buyers can’t afford to buy a house, they opt to live in home rentals, which is why it makes sense to follow this rental strategy to make money in the California housing market. If you’re also planning to buy a traditional investment property, here are the 5 best places to invest in real estate in California in 2020 according to Mashvisor:

#1. Douglas City

Median Property Price: $399,927
Price/Square Foot: $284
Price to Rent Ratio: 12
Monthly Traditional Rental Income: $2,723
Traditional Cap Rate: 5.6%

#2. Coalinga

Median Property Price: $256,758
Price/Square Foot: $145
Price to Rent Ratio: 9
Monthly Traditional Rental Income: $2,198
Traditional Cap Rate: 5.3%

#3. Lake Los Angeles

Median Property Price: $219,663
Price/Square Foot: $186
Price to Rent Ratio: 9
Monthly Traditional Rental Income: $1,986
Traditional Cap Rate: 5.1%

#4. Blythe

Median Property Price: $220,201
Price/Square Foot: $150
Price to Rent Ratio: 11
Monthly Traditional Rental Income: $1,647
Traditional Cap Rate: 4.7%

#5. Salton City

Median Property Price: $165,783
Price/Square Foot: $116
Price to Rent Ratio: 9
Monthly Traditional Rental Income: $1,472
Traditional Cap Rate: 4.7%

Best Places to Invest in California Airbnb Rentals

Airbnb short-term rentals are another great real estate investment strategy. And since California is a top tourist destination, it makes sense to invest in Airbnb here. While it’s true that Airbnb California can be very profitable, California also has some of the toughest Airbnb laws and regulations. In most of the Golden State, buying an investment property for the purpose of renting it out as a vacation home on Airbnb is illegal! You can only rent out your house on Airbnb if you’re a California real estate investor and you already own your personal residence. There are, of course, more laws and regulations that you should look up before considering this rental strategy in the California housing market 2020.

Mashvisor’s Airbnb data shows that the following are the 5 best cities in California for Airbnb hosts in 2020:

#1. Winchester

Median Property Price: $464,442
Price/Square Foot: $205
Average Daily Rate: $137
Monthly Airbnb Rental Income: $5,304
Airbnb Occupancy Rate: 59.8%
Airbnb Cap Rate: 7%

#2. Rancho Cordova

Median Property Price: $377,265
Price/Square Foot: $211
Average Daily Rate: $163
Monthly Airbnb Rental Income: $4,222
Airbnb Occupancy Rate: 60.4%
Airbnb Cap Rate: 7%

#3. Hanford

Median Property Price: $329,837
Price/Square Foot: $170
Average Daily Rate: $154
Monthly Airbnb Rental Income: $3,373
Airbnb Occupancy Rate: 56.8%
Airbnb Cap Rate: 6.9%

#4. Clearlake Oaks

Median Property Price: $270,070
Price/Square Foot: $200
Average Daily Rate: $187
Monthly Airbnb Rental Income: $3,090
Airbnb Occupancy Rate: 53.5%
Airbnb Cap Rate: 6.8%

#5. Yuba City

Median Property Price: $378,415
Price/Square Foot: $208
Average Daily Rate: $111
Monthly Airbnb Rental Income: $2,802
Airbnb Occupancy Rate: 61.4%
Airbnb Cap Rate: 6.4%

To start looking for and analyzing the best investment properties (both traditional and Airbnb) in your city and neighborhood of choice, click here.

Key Takeaways

Now you know the 10 best places to invest in California in 2020. Once you pick your real estate market of choice, make sure to use Mashvisor’s Investment Property Calculator to analyze homes for sale. Mashvisor allows you to run a rental property analysis based on reliable real estate data to see what kind of ROI you can expect from buying rental properties in your housing market of choice. As a result, finding the best rental properties out there that’ll generate the most profit is easier than ever. It can even be done in just 15 minutes! Want to give our investment tools a try? Start out your 7-day free trial with Mashvisor now.

Start Your Investment Property Search!