Best Cities for Rental Properties in California
The Best Locations in California for Rental Property Investments There is a long list of states that are currently experiencing a boom in popularity when it comes to real estate investment markets. While Texas, Florida, Arizona, North Carolina and other states are great places to look for new homes, California seems to eclipse them all in sheer size and continues to attract people from all over the country, to live and invest in real estate.
California may be one of the best places to buy a rental property, if not the best . Let's examine the Golden State as a location for investments.
Investing in rental properties is a great way to increase your wealth and equity. However, your profit potential depends on where you invest.
This blog will examine the California real estate market in more detail and explain why it is a good location to invest in rental properties.
Despite the fact that California remains one of the most popular states in the United States, not all real estate investments may be right for you. One area of California may be more suitable for you than another depending on your spending limit, return goals, and maintenance capabilities.
The economy is booming and there are many different industries in the diverse state of California. It has it all, attracting both local and foreign visitors to every corner, from movie sets to financial companies. So how do you choose the perfect location to buy a rental property in this area? What are the best locations in California to invest in 2023?
Finding the best location in California to invest in real estate can be difficult given the abundance of options available. Don’t worry; this guide is for you if you’re looking for the best places to buy investment property in California this year.
California Real Estate Market Value.
Let’s examine the viability of the California housing market before deciding where to buy rental property in the state. Compared to its neighboring states, California’s real estate market is significantly more expensive. However, compared to most places nationwide, the returns investors see are on a completely different level.
According to a recent report from the California Association of Realtors (CAR), home prices will rise 5.2% through 2023. Additionally, it expects housing affordability to decline 23% the following year, up from a projected 26% in 2021.
This suggests that you will likely see greater property appreciation on your property over the next few years simply by investing in income properties in California rather than properties in another state. The higher initial cost may be offset by the potential return on investment (ROI).
In addition, California's diverse cultural industries and state regulations offer its investors a number of advantages, including the following:
Expanding the labor market
California continues to rank among the top 10 states for job opportunities in 2022 and 2023 despite COVID-19 disrupting nearly every industry. Furthermore, the University of California Riverside (UCR) reports that in September 2022, California’s job market will continue to grow, albeit at a slower pace.
California's unemployment rate as of September 2022 was 3.9%, which is still high compared to the 3.5% rate for the entire United States.
Entering the U.S. housing market in 2023, California should continue to experience high demand for rental units. The state should be the ideal place to buy a rental property due to the continued strength in rental demand.
High demand for rentals and high rental prices
One might assume that rental costs would have to be lowered to attract tenants given the sudden and intermittent increases of COVID-19. But in the California real estate market, that’s not the case.
Rental rates in California increased by 22.04% from August last year to August this year. This reflects the strong demand in California for long-term rental properties. Investors should seize this opportunity to increase their return on investment due to the rise in rental prices.
According to data collected and reviewed by Mashvisor, a market-leading real estate data analytics platform, the median monthly rental income in California as of October 2022 was $3,176. That’s significantly higher than the national average.
Increase property value
All of California’s major investment areas are experiencing year-over-year growth in real estate market value. In 2022, the statewide average home price is expected to rise by 5.2%. This means that when investors decide to sell their property, they can always expect to make a significant profit compared to the price they originally purchased it for.
According to Mashvisor, the median home price in California’s real estate market as of October 2022 is $903,256. You can expect a significant increase in the value of your income property over the next 12 months, given an expected appreciation of 5.2% through 2023.
With this positive increase in value, California has effectively established itself as the best location in the state to buy a rental property.
Is California's migration a concern?
California’s COVID-19 exit has been getting a lot of attention. People are leaving California in record numbers, depressing real estate values in the state. Investors remain concerned about this as we prepare to enter 2023.
Studies have shown that, statistically, the number of people leaving California has not changed significantly compared to pre-pandemic times.
Studies have shown that California’s population has declined as a result of people leaving the state due to the pandemic, but the impact has not been very large. In 2016, 16% of California’s population left the state. There were about 352,000 fewer residents in the state between April 2020 and September 2022.
Despite the rising number of residents leaving the state, analysts are confident that this will not have a negative impact on California’s real estate market. The state’s position as the best place to buy rental property in 2023 will not be affected by this trend.
In order to make its real estate value attractive to investors, California continues to attract millions of businessmen and companies. In fact, the end of 2022 and the beginning of 2023 are expected to see a 5.2% increase in home values in the California real estate market.
Since California still generally has a very strong real estate market, in such a scenario, you can benefit from a great return on investment in the best places to invest there.
However, moving out of California should not be a major concern or deciding factor if you are looking to invest in income-producing real estate in California.
California Long Term vs. Short Term Rental Market in 2023
Given the potential for great returns, many investors are trying to figure out where in the Golden State is the best place to invest in real estate. Depending on a variety of criteria, individual investors may have different preferences for the biggest investment opportunities in California in 2023.
Investors must choose whether they are looking for an investment property as a long-term rental or a vacation rental property if they want to take full advantage of California's best rental market.
While each has its advantages, choosing one over the other can significantly impact your investment returns. Before purchasing an investment property in California for long-term and short-term rentals, consider the following:
Availability rate
The main goal when owning a rental property, whether it is a long-term property or a vacation rental property, is to find consistent tenants so that you can make money. Since long-term leases are often signed for at least a year, investors usually see consistent occupancy.
On the other hand, short-term seasonal rentals are available. This means that the property may not be occupied at times while at other times it benefits from strong demand for short-term rentals.
Locations with a stronger long-term rental market may be a better option for you if you're looking for a more consistent and predictable occupancy rate.
Total income
While investing in a short-term rental property may require more work, it will likely bring in more money than a long-term rental property. A flat annual rate will be applied to each month’s rent for a long-term rental property.
Conversely, a short-term rental property in California has the potential to generate more rental income because you may charge more per night, depending on the season.
Profit from investment
The rate of return that a property provides for income should be the deciding factor in any real estate investment decision.
Long-term versus short-term rental properties produce very diverse returns on investment even within the same city and even within a neighborhood. To achieve the greatest return, you should study the community and the investment property before choosing a rental strategy.
Key numbers in the California rental market that every investor should consider before purchasing an investment property are listed below. They are derived from data from Mashvisor as of October 2022:
- Average property price: $903,256
- Average price per square foot: $647
- Number of days on the market: 67
- Number of long-term rental properties: 44,827
- Monthly income from long-term rental: $3,176
- Long Term Lease Cash Yield: 2.48%
- Long term rental cap rate: 2.50%
- Price to Rent Ratio: 24
- Number of short-term rental properties : 74,041
- Monthly income from short-term rental: $4,412
- Short term rental cash yield: 3.20%
- Maximum rate for short-term rentals: 3.23%
- Daily short term rental price: $234
- Short term rental occupancy rate: 55%
- Walking Points: 50
20 Best California Investment Sites for 2023
Both long-term and short-term rentals like Airbnb continue to generate significant profits in California. While both real estate investment strategies will undoubtedly lead to profit, not all locations with a healthy long-term rental market will also attract guests for short-term rentals, and vice versa.
Mashvisor's real estate data makes it easy to analyze all the important factors to make the best choice when searching for the best places to invest in California.
Mashvisor's long-term and short-term leasing data analytics are here to help, no matter what type of leasing strategy you plan to implement!
The locations listed below are those in the California real estate market that offer the highest long-term or short-term cash rental yield.
Top 10 California Locations for Long Term Rental Property Investments in 2023
According to data from Mashvisor as of October 2022, the following areas in California are the best places to buy a long-term rental property:
1. Redlands
- Average property price: $678,440
- Average price per square foot: $375
- Number of days on the market: 64
- Number of long-term rental properties: 143
- Long-term monthly rental income: $2,822
- Long Term Lease Cash Yield: 2.98%
- Maximum long term rental rate: 3.01%
- Price to Rent Ratio: 20
- Walking Points: 85
2. Palm Springs
- Average property price: $998,098
- Average price per square foot: $536
- Number of days on the market: 57
- Number of long-term rental properties: 198
- Monthly income from long-term rental: $3,708
- Long Term Lease Cash Yield: 2.92%
- Long term rental cap rate: 2.97%
- Price to Rent Ratio: 22
- Walking Points: 59
3. Riverside
- Average property price: $651,637
- Average price per square foot: $393
- Number of days on the market: 55
- Number of long-term rental properties: 384
- Long-term monthly rental income: $2,779
- Long Term Lease Cash Yield: 2.86%
- Long term rental cap rate: 2.90%
- Price to Rent Ratio: 20
- Walking points: 36
4. Hawthorne
- Average property price: $964,499
- Average price per square foot: $667
- Number of days on the market: 49
- Number of long-term rental properties: 101
- Monthly income from long-term rental: $3,984
- Long Term Lease Cash Yield: 2.80%
- Maximum long-term rental rate: 2.82%
- Price to Rent Ratio: 20
- Walking Points: 87
5. Santa Ana
- Average property price: $836,867
- Average price per square foot: $555
- Number of days on the market: 62
- Number of long-term rental properties: 207
- Monthly income from long-term rental: $3,466
- Long Term Lease Cash Yield: 2.71%
- Maximum long term rental rate: 2.74%
- Price to Rent Ratio: 20
- Walking Points: 97
6- Santa Clarita
- Average property price: $783,397
- Average price per square foot: $462
- Number of days on the market: 50
- Number of long-term rental properties: 200
- Long-term monthly rental income: $3,304
- Long Term Lease Cash Yield: 2.64%
- Maximum long term rental rate: 2.66%
- Price to Rent Ratio: 20
- Walking points: 27
7. Thousand Oaks
- Average property price: $983,507
- Average price per square foot: $536
- Number of days on the market: 44
- Number of long-term rental properties: 276
- Long-term monthly rental income: $3,857
- Long Term Lease Cash Yield: 2.63%
- Maximum long term rental rate: 2.65%
- Price to Rent Ratio: 21
- Walking Points: 66
8. Simi Valley
- Average property price: $823,789
- Average price per square foot: $467
- Number of days on the market: 64
- Number of long-term rental properties: 122
- Long-term monthly rental income: $3,444
- Long Term Lease Cash Yield: 2.62%
- Maximum long term rental rate: 2.65%
- Price to Rent Ratio: 20
- Walking Points: 79
9. Pomona
- Average property price: $658,357
- Average price per square foot: $2,245
- عدد الأيام في السوق: 58
- Number of long-term rental properties: 207
- Long-term monthly rental income: $2,756
- Long Term Lease Cash Yield: 2.61%
- Maximum long term rental rate: 2.65%
- Price to Rent Ratio: 20
- Walking Points: 75
10. Anaheim
- Average property price: $825,103
- Average price per square foot: $538
- Number of days on the market: 53
- Number of long-term rental properties: 455
- Monthly income from long-term rental: $3,397
- Long Term Lease Cash Yield: 2.51%
- Maximum long term rental rate: 2.53%
- Price to Rent Ratio: 20
- Walking Points: 51
Top 10 California Locations for Short-Term Rental Property Investments in 2023
Here are the top areas in California to buy short-term rental properties this year:
1. Riverside
- Average property price: $651,637
- Average price per square foot: $393
- Number of days on the market: 55
- Number of short-term rental properties: 205
- Monthly income from short-term rental: $4,991
- Short Term Lease Cash Yield: 4.92%
- Maximum rate for short-term rentals: 4.99%
- Daily short term rental price: $216
- Short term rental occupancy rate: 57%
- Walking points: 36
Find short term rental properties in Riverside, CA here .
2. Visalia
- Average property price: $443,504
- Average price per square foot: $235
- Number of days on the market: 55
- Number of short-term rental properties: 153
- Monthly income from short-term rental: $3,288
- Short Term Lease Cash Back: 4.75%
- Maximum rate for short-term rentals: 4.86%
- Daily short term rental price: $142
- Short term rental occupancy rate: 55%
- Walking Points: 48
3. Escondido
- Average property price: $881,536
- Average price per square foot: $469
- Number of days on the market: 60
- Number of short-term rental properties: 131
- Monthly income from short-term rental: $6,264
- Short Term Lease Cash Yield: 4.63%
- Maximum rate for short-term rentals: 4.68%
- Daily short term rental price: $344
- Short term rental occupancy rate: 51%
- Walking Points: 42
4. Anaheim
- Average property price: $825,103
- Average price per square foot: $538
- Number of days on the market: 53
- Number of short-term rental properties: 786
- Monthly income from short-term rental: $5,952
- Short Term Lease Cash Yield: 4.54%
- Maximum rate for short-term rentals: 4.57%
- Daily short term rental price: $270
- Short term rental occupancy rate: 64%
- Walking Points: 51
5. Santa Fe Springs
- Average property price: $695,130
- Average price per square foot: $534
- Number of days on the market: 57
- Number of short-term rental properties: 187
- Monthly income from short-term rental: $5,195
- Short Term Lease Cash Yield: 4.46%
- Maximum rate for short-term rentals: 4.52%
- Daily short term rental price: $176
- Short term rental occupancy rate: 64%
- Walking Points: 78
Related Topics: How to Estimate Vacation Rental Income
6. Bakersfield
- Average property price: $440,130
- Average price per square foot: $535
- Number of days on the market: 54
- Number of short-term rental properties: 289
- Monthly income from short-term rental: $3,175
- Short Term Lease Cash Yield: 4.42%
- Maximum rate for short-term rentals: 4.53%
- Daily short term rental price: $168
- Short term rental occupancy rate: 56%
- Walking Points: 28
7. Paramount
- Average property price: $628,412
- Average price per square foot: $469
- Number of days on the market: 132
- Number of short-term rental properties: 193
- Monthly income from short-term rental: $4,605
- Short Term Lease Cash Yield: 4.40%
- Maximum rate for short-term rentals: 4.46%
- Daily short term rental price: $190
- Short term rental occupancy rate: 63%
- Walking Points: 89
8. Chula Vista
- Average property price: $784,108
- Average price per square foot: $452
- Number of days on the market: 57
- Number of short-term rental properties: 251
- Monthly income from short-term rental: $5,500
- Short term rental cash yield: 4.15%
- Maximum rate for short-term rentals: 4.20%
- Daily short term rental price: $271
- Short term rental occupancy rate: 60%
- Walking Points: 29
9. Hawaiian Gardens
- Average property price: $888,967
- Average price per square foot: $478
- Number of days in the market : 37
- Number of short-term rental properties: 166
- Monthly income from short-term rental: $4,830
- Short Term Lease Cash Yield: 4.12%
- Maximum rate for short-term rentals: 4.17%
- Daily short term rental price: $187
- Short term rental occupancy rate: 68%
- Walking Points: 90
10. Sacramento
Attempts at property management
Most individuals buy investment homes to generate passive income, but maintaining and managing both long-term and short-term rentals still takes some effort.
However, compared to long-term rental homes, short-term rentals require much more daily maintenance. For each new visitor, short-term rentals must be fully furnished and cleaned several times a month.
However, long-term rentals may be relatively unfurnished and require less monthly maintenance than an investor. Short-term rentals may not be the best approach for you if you prefer a more conservative investment.
Before you embark on purchasing an investment property to use as a rental property, keep this in mind.
Proposition 13 and Low Taxes
It’s no secret that California has some of the most expensive housing markets in the country, but it also has some of the lowest annual property taxes. General property taxes are limited to just 1% of the total market value of your property and are subject to a 2% increase cap each year due to a law known as Proposition 13.
Investors are more likely to see a profit when purchasing investment properties in California due to low property taxes and oversight. As a result, both beginners and experienced investors will find purchasing investment properties more attractive.
Historical Context of the California Market
Los Angeles, San Diego, and San Francisco are just a few of the state’s major populous centers. California has been the most populous state in the country for the past 60 years. One of the most attractive states for real estate investors , its attractiveness and population density have contributed to the country’s high real estate prices.
Top 40 Cities to Invest in Real Estate 2023
What makes California so beloved?
The image of California, and especially Los Angeles, is quintessential with miles of gorgeous beaches, perfect weather year-round, and fame around every corner. California has long been a melting pot of cultures and ideas and has evolved into a hub for some of the country’s largest employers, particularly in the tech industry. However, this can vary greatly depending on where you are in the state.
California is a foodie paradise, and it also has a large agricultural sector that produces a huge variety of foods. Additionally, the state has more national parks than any other state and offers a variety of weather, landscapes, and attractions. With all of these contributing factors, it’s easy to see why so many people want to move to California and experience all it has to offer, or simply want to plan a vacation there.
California Cities for Real Estate Investment
So, California has a large population. How can you take advantage of this? Many cities and localities in the state have seen rental property values rise recently. While California cities didn’t make our top 10, there are still plenty of exciting opportunities for investment properties. We’ve talked about the best cities in the state to invest in real estate in 2022. That’s why it’s important to do your homework and choose the perfect area to invest in because it could mean the difference between a lucrative rental and one that sits empty.
In Los Angeles
There’s a reason Los Angeles has contributed to California’s massive population growth, and it’s perhaps not surprising. Los Angeles and its vast metro area usually come to mind when most people think of California (or even the West Coast). In addition to being an incredibly diverse city with a quick escape to stunning natural beauty nearby, Los Angeles also has neighboring cities that can offer a variety of environments and properties to suit your investment style.
To illustrate, Huntington Beach, one of the country’s top vacation destinations, is the perfect place to start a brand-new vacation rental. With a high rental household rate compared to the rest of California, Hawthorne is another example of a city in the Los Angeles metro area that is a great value for investors.
Anaheim
Anaheim is one of the best areas in California for short-term rentals due to its thriving tourism industry, despite being part of the Los Angeles metropolitan area. This city, home to Disneyland and Knott’s Berry Farm, has a very high rental demand, which drives up rents significantly (to over $3,000). While the initial investment for any property in the Los Angeles area can be high, Anaheim rentals will have no problem recouping those costs.
Sacramento
Sacramento, the capital of California, is often overlooked and undervalued. However, due to its high price-to-rent ratio, most people are likely to choose to rent a home rather than buy one. Because of this trend, landlords have a lot of demand for their rental properties throughout the city. Sacramento can be a hidden gem, which is easy to understand given the area’s peaceful landscape and nearby vineyards and breweries.
Los Angeles / San Francisco
The San Francisco Bay Area and two major real estate investment cities are located southwest of Sacramento. Renters’ wages in this area rose 18% in 2021, and the area’s low unemployment rate encourages long-term rentals. While San Francisco real estate is significantly more expensive than Oakland real estate (often by a factor of two), the city’s economy and job market are also much more expensive. Oakland also offers great rental opportunities for commuters or people working outside of San Francisco if you’re looking for a lower initial investment.
Florida desert
Palm Springs offers the perfect blend of California lifestyle as it is located inland between Los Angeles and San Diego. It offers a luxurious atmosphere that allows for higher rents and provides many upscale amenities. Palm Springs is able to cater to the vacation and short-term rental markets as it has grown to become a popular vacation destination.
Angels
The San Diego Zoo, SeaWorld, and the Padres MLB team are just a few of the entertainment options in San Diego, which is located south of Palm Springs. Plus, the city has a thriving arts scene and more than 70 miles of stunning coastline. These elements, coupled with the fact that renters’ wages are set to rise significantly in 2021, suggest that the rental market is primed for further expansion, which investors can take advantage of.
With Visio, finance your rent in California
When you choose your next rental location, work with the market leader in lease loans to finance your purchase. We offer flexible terms and have extensive market knowledge from closing hundreds of loans in California over the past few years.