A growing economy accompanied by a growing population has turned California into one of the best markets to invest in real estate today. Yet many real estate investors refrain from investing in the Golden State, thinking that they won’t find cheap real estate in California. Although in some areas property prices have become exponentially high and cater to investors within a higher income bracket, many cities remain affordable for the average real estate investor.
So, what are the most affordable cities in California to invest in today? In this guide, we will recommend the most affordable cities in California that will derive a high return on investment and positive cash flow, if planned accordingly.
Related: The Best Places in California to Buy an Investment Property in 2018
Before we delve into our list of the best places to invest in real estate in California, let’s explore the California real estate market and its growth indicators.
The California Real Estate Market: Overview and Forecast
Although it houses expensive investment properties, California still enjoys a fruitful real estate market. Its economy grew 4.7% in the last 12 months ending in February, as compared to the national average of 2.8%. This, of course, boosts growth in the real estate sector and this economic growth is also expected to rise even further, continuing to surpass the national average growth rate. California’s employment rate, moreover, is stable hovering at around 4.1%. It is lower than the national average, which is also promising. As for the income per capita, it has grown over 3% in the last three years. The healthy economy of California is one that is encouraging for real estate investments.
As the economy is growing, so are home prices. Property prices have gone up 4% over the past year, and are expected to rise another 7.3% this year. The increase in home prices accompanied by a booming economy is an indicator of the attractiveness of the California housing market. Although the median home price is high and many cannot afford it, the California housing market still has many cheap houses for sale within its neighborhoods. Thus, we recommend that you further seek out the opportunity to invest in California real estate.
The data below has been generated using Mashvisor’s investment property calculator. Mashvisor’s investment calculator is a tool enabling property investors to analyze real estate investment opportunities– both on the market and property level.
Here’s what the profitability of California real estate as a whole looks like:
- Median Property Price: $680,686
- Monthly Traditional Rental Income: $2,600
- Traditional Cash on Cash Return: 1.6%
- Airbnb Occupancy Rate: 45%
- Monthly Airbnb Rental Income: $3,307
- Airbnb Cash on Cash Return: 2.2%
While Airbnb rental properties seem to be more profitable in the California real estate market, note that non-owner occupied rentals are illegal across many cities in the state. Be sure to check out local Airbnb regulations before considering the short-term rental strategy.
The Most Affordable Cities in California in 2019
Below is a list of the most affordable cities in California that any real estate investor on a budget can afford.
#1: Yucca Valley
One of the most affordable real estate markets in California is Yucca Valley. Yucca Valley is a small city in San Bernardino County. The city is located about 55 miles east of San Bernardino and lies in the middle of the Morongo Basin. If you are looking for a traditional rental property investment in California, consider Yucca Valley.
- Median Property Price: $266,110
- Monthly Traditional Rental Income: $1,399
- Traditional Cash on Cash Return: 2%
Related: The Best Neighborhoods in California for Real Estate Investing
Clearlake is a city in Lake County. It lies about 4.5 miles north-northwest of Lower Lake. The town gives off a suburban feel attracting many families to its rental properties. Of a population of as little as 16,000, about 50% of the population lives in owner-occupied properties, while the rest rent out properties. The high percentage of renter-occupied properties in Clearlake makes investing in rental properties a viable option for investors in this location. If you are looking for the most affordable cities in California with high rental property demand, then certainly Clearlake is the place to look.
- Median Property Price: $255,893
- Monthly Traditional Rental Income: $1,160
- Traditional Cash on Cash Return: 1.9%
Ridgecrest is a city in Kern County that lies along US Route 395 in the Indian Wells Valley. Ridgecrest has a population of about 28,000, with families and young professionals making up the majority of the population. Families prefer living and raising their children in Ridgecrest for the excellent schooling system that the city enjoys. About 62% of the population owns their houses. However, 38% rent their homes, which still makes investing in rental properties in Ridgecrest a plausible option.
- Median Property Price: $232,102
- Monthly Traditional Rental Income: $1,695
- Traditional Cash on Cash Return: 3.6%
Hemet is a city in the San Jacinto Valley in Riverside County, California. Being that it is an affordable housing market and it’s only about 80 miles southeast of Los Angeles, Hemet is an investment destination for many real estate investors. In fact, Hemet is one of the best and most affordable cities in California and one should never miss out on the opportunity of investing in it. Although about 42% of households are renter-occupied, this share is still pretty large. If you are looking for a California investment property with a suburban feel that is in close proximity to Los Angeles, consider Hemet.
- Median Property Price: $287,856
- Monthly Traditional Rental Income: $1,337
- Traditional Cash on Cash Return: 1.5%
Related: The 10 Best Places to Buy Rental Property in California in 2019
When you hear people referring to California real estate investing, you might shutter at the thought of the high prices. Surely, the state has some of the most expensive properties in the US housing market, yet many of its cities are still affordable. The most affordable cities in California and those with high-profit prospects are listed above for you to start exploring. To supplement your search of a selected area, resort to Mashvisor’s heatmap analysis tool. This tool will help you find even more affordable neighborhoods in each city. Click here to try it out.