Best Cities for Rental Properties in California: A Comprehensive Guide for Investors in 2025
California has long been a dream destination for real estate investors, and it’s easy to see why. With its diverse economy, stunning landscapes, and a population that continues to grow, the Golden State offers incredible opportunities for those looking to invest in rental properties. As of February 25, 2025, the California rental market remains a hot topic, with rising demand and a mix of affordable and high-end options making it a prime spot for building wealth through real estate. But where should you invest? Which cities offer the best returns, tenant demand, and long-term growth potential?
Why Invest in Rental Properties in California?
Before we jump into the top cities, let’s talk about why California is such a compelling place for rental property investments. The state’s population exceeds 39 million, making it the most populous in the U.S. This sheer volume of people creates a constant demand for housing—especially rentals. According to recent data, California’s median home price hovers around $800,000, pricing many residents out of homeownership and into the rental market.
Additionally, California boasts a robust economy driven by industries like technology, entertainment, agriculture, and tourism. Cities like Los Angeles, San Francisco, and San Diego are global hubs, while inland areas like Sacramento and Fresno offer affordability paired with steady job growth. The state’s low property tax rates, capped at 1% of a property’s value under Proposition 13, also sweeten the deal for investors.
However, it’s not all sunshine and palm trees. High property prices, competitive markets, and strict regulations—like limits on security deposits (capped at one month’s rent as of July 2024)—mean you’ll need to choose your location wisely. That’s where this guide comes in. Let’s explore the top cities that strike the perfect balance between affordability, rental demand, and ROI potential.
1. Sacramento: The Affordable Capital with High Rental Demand
Why Sacramento?
Sacramento, the state capital, often flies under the radar compared to flashier coastal cities, but it’s a hidden gem for rental property investors. With a median home value of around $476,984 (down 3.7% from last year), Sacramento offers a more affordable entry point than cities like San Francisco or Los Angeles. This affordability, paired with a high price-to-rent ratio, means many residents opt to rent rather than buy, driving consistent demand for rental properties.
Key Stats
- Average Monthly Rent: $1,856 (above the national average)
- Median Home Value: $476,984
- Vacation Rental Income: ~$8,800/year (daily rate of $110)
- Occupancy Rate: 39% for vacation rentals
What Makes It Great?
Sacramento’s appeal lies in its blend of urban amenities and suburban charm. The city’s economy is bolstered by government jobs, tech growth, and a thriving arts scene. Nearby vineyards and breweries add a lifestyle perk that attracts tenants, from young professionals to families. Plus, its proximity to the Bay Area (just a 90-minute drive) makes it a viable option for commuters seeking lower living costs.
For investors, Sacramento’s buyer-friendly market—where homes have dropped in price recently—presents a golden opportunity to snag properties at a discount. Long-term rentals here offer steady cash flow, while short-term rentals can capitalize on tourism to nearby attractions like Lake Tahoe.
Source
Learn more about Sacramento’s rental market trends at Visio Lending.
2. Anaheim: The Tourism Powerhouse
Why Anaheim?
If you’re looking for a city where short-term rentals thrive, Anaheim is a no-brainer. Home to Disneyland and Knott’s Berry Farm, this Orange County gem is a tourism magnet. The constant influx of visitors creates sky-high demand for vacation rentals, pushing average rents upwards of $3,000 per month.
Key Stats
- Median Home Value: $844,175 (up 3% year-over-year)
- Average Rent: Over $3,000/month
- Days on Market: 13 (a hot seller’s market)
What Makes It Great?
Anaheim’s location in the Los Angeles metro area gives it access to a massive tenant pool, while its tourism-driven economy ensures short-term rental success. The city’s proximity to Newport Beach, San Bernardino National Forest, and Riverside County adds to its allure for both visitors and long-term residents. However, the high initial investment cost (median home values are steep) means you’ll need significant capital to get started—but the returns can quickly offset that.
For investors, Anaheim is ideal for Airbnb or VRBO listings. Properties near theme parks or major attractions tend to stay booked year-round, offering a strong ROI despite the upfront expense.
Source
Check out Anaheim’s investment potential at HomeAbroad.
3. San Diego: Coastal Living with Steady Growth
Why San Diego?
San Diego combines a laid-back beach vibe with a booming economy, making it one of California’s most desirable rental markets. Known for its warm climate and outdoor recreation, the city attracts a diverse tenant base—think military personnel, tech workers, and retirees. Low vacancy rates and steady rental growth make it a safe bet for long-term investments.
Key Stats
- Median Home Price: ~$852,500
- Year-over-Year Rent Increase: 16.2%
- Home Value Growth: 13% in the past year
What Makes It Great?
San Diego’s economy is fueled by technology, healthcare, and tourism, ensuring a steady stream of renters. The city’s universities, like UC San Diego, also drive demand for student housing. With a median rent well above the national average, landlords can charge premium rates while benefiting from property appreciation.
The downside? It’s a competitive market with high living costs. But for those who can afford the entry price, San Diego offers a mix of long-term stability and short-term rental potential, especially near the coast.
Source
Dive into San Diego’s rental market at BFPM Inc..
4. Los Angeles: The Entertainment Capital
Why Los Angeles?
Los Angeles needs little introduction. As a global hub for entertainment, tech, and culture, LA’s rental market is as dynamic as its population. With a massive renter base (54% of LA County residents rent), the city offers endless opportunities for both short- and long-term rentals.
Key Stats
- Median Home Price: Over $800,000
- Average Daily Vacation Rental Rate: $246
- Rental Demand: High due to limited housing availability
What Makes It Great?
LA’s diverse neighborhoods cater to every demographic—young professionals in Downtown, families in Santa Clarita, and tourists in Hollywood. The city’s strong job market and tourism industry fuel demand, while its public transit network makes it accessible for renters without cars. Short-term rentals thrive here thanks to visitors flocking to beaches, studios, and landmarks.
However, LA comes with challenges: high costs, fierce competition, and strict regulations (some areas ban vacation rentals outright). Investors need to research local rules and target high-demand pockets like East LA or Hawthorne for the best returns.
Source
Explore LA’s rental landscape at Defy Mortgage.
5. Fresno: Affordable Growth in the Central Valley
Why Fresno?
Fresno, nestled in California’s Central Valley, offers a refreshing contrast to coastal cities. Its lower cost of living and growing economy make it a hotspot for investors seeking affordable properties with solid returns. Median home prices sit under $500,000, a steal compared to the state average.
Key Stats
- Median Home Price: ~$461,667
- Rental Rates: $1,700–$2,000/month
- Vacancy Rate: Below 6%
What Makes It Great?
Fresno’s economy is diverse, with agriculture, healthcare, and education leading the charge. California State University, Fresno, adds a steady stream of student renters, while the city’s affordability attracts families and retirees. Property values have jumped 50.78% over the past five years, signaling strong appreciation potential.
For investors, Fresno offers a balanced ROI with lower entry costs. It’s less flashy than LA or San Diego, but its stability and growth make it a smart long-term play.
Source
Learn more about Fresno’s market at Newbie Real Estate Investing.
6. San Bernardino: College Town Value
Why San Bernardino?
San Bernardino, another Inland Empire standout, combines low property prices with high rental demand. Home to California State University, San Bernardino, the city attracts students, young professionals, and families looking for affordable housing near LA.
Key Stats
- Median Home Price: Under $500,000
- Rental Rates: ~$1,700/month
- Property Appreciation: Steady growth
What Makes It Great?
San Bernardino’s proximity to Los Angeles (about an hour’s drive) makes it a commuter-friendly option, while its college population ensures a reliable tenant base. The city’s affordability—median prices are well below the state average—offers a low barrier to entry for new investors. Plus, its growing job market in logistics and healthcare adds stability.
The trade-off? Rental yields may be lower than in coastal cities. Still, for those prioritizing cash flow and appreciation, San Bernardino is a solid pick.
Source
Get the scoop on San Bernardino at TurboTenant.
7. Palm Springs: Desert Oasis for Vacation Rentals
Why Palm Springs?
Palm Springs is a desert jewel known for mid-century modern homes and a celebrity allure. With median home prices around $575,000, it’s more affordable than many coastal cities, yet its high rental rates make it a vacation rental goldmine.
Key Stats
- Median Home Price: $575,000
- Rental Rates: Above average for the state
- Job Growth: Steady influx of young professionals
What Makes It Great?
Palm Springs’ year-round warm weather and proximity to attractions like Joshua Tree National Park draw tourists and seasonal renters. The city’s growing population of young professionals also boosts long-term rental demand. Competition for properties is high, but acting now can secure a foothold in this lucrative market.
For investors, short-term rentals here promise exceptional returns, especially during peak seasons like Coachella or winter escapes.
Source
Discover Palm Springs’ potential at California.com.
8. Bakersfield: The Central Valley Bargain
Why Bakersfield?
Bakersfield, another Central Valley contender, is a haven for affordable real estate and a growing rental market. With a median home price below $400,000, it’s one of the cheapest entry points in California.
Key Stats
- Median Home Price: ~$461,667
- Rental Rates: Competitive with coastal cities
- Economy: Diverse (oil, agriculture, tech)
What Makes It Great?
Bakersfield’s economy is bolstered by oil production, agriculture, and an emerging tech sector, attracting a mix of renters. Its affordability appeals to families and young professionals, while its location—driving distance from LA and Fresno—adds convenience. Properties here offer strong cash flow and appreciation potential.
The downside? It lacks the glamour of coastal cities, but for budget-conscious investors, that’s a small price to pay.
Source
See why Bakersfield shines at List with Clever.
9. Long Beach: Coastal Affordability
Why Long Beach?
Long Beach strikes a balance between coastal appeal and affordability, making it a standout in Southern California. With a diverse economy and a vibrant rental market, it’s a favorite for both long-term and short-term investors.
Key Stats
- Median Home Price: More affordable than LA
- Rental Demand: High (students, professionals, tourists)
- Economy: Port, tech, education
What Makes It Great?
Long Beach’s port, tech sector, and California State University presence create a robust job market and tenant pool. Its beachfront lifestyle and proximity to LA (without LA prices) make it a renter’s paradise. Properties here see low vacancy rates and consistent appreciation.
Investors can target student housing or vacation rentals near the waterfront for maximum returns.
Source
Explore Long Beach’s market at Apartment List.
10. Santa Clarita: Family-Friendly Returns
Why Santa Clarita?
Santa Clarita, just north of LA, is a family-oriented city with top schools and safe neighborhoods—perfect for residential rentals. Its high median household income allows landlords to charge premium rents.
Key Stats
- Median Home Price: Competitive with LA suburbs
- Rental Rates: Above state average
- Population Growth: Slow but steady
What Makes It Great?
Santa Clarita’s appeal to families and professionals ensures long-term tenant stability. While population growth is modest, the city’s strong economy and proximity to LA keep rental demand high. It’s a great spot for single-family home investments.
The catch? High home prices mean you’ll need a bigger budget, but the returns justify it.
Source
Learn more at Mashvisor.
Tips for Choosing the Right City
Investing in California rental properties requires strategy. Here are some tips to guide your decision:
- Budget: Coastal cities like LA and San Diego demand higher upfront costs, while inland options like Fresno and Bakersfield are more affordable.
- Rental Strategy: Short-term rentals thrive in tourist hubs (Anaheim, Palm Springs), while long-term rentals suit stable markets (Sacramento, Santa Clarita).
- Regulations: Check local laws—some cities restrict vacation rentals or impose rent control.
- Growth Potential: Look for cities with job growth and population increases for future appreciation.
- Tenant Demographics: Match your property to the area’s renters (students, families, tourists).
Conclusion: Where Will You Invest?
California’s rental market offers something for every investor, from the tourism-driven profits of Anaheim to the affordable stability of Fresno. As of February 25, 2025, these 10 cities—Sacramento, Anaheim, San Diego, Los Angeles, Fresno, San Bernardino, Palm Springs, Bakersfield, Long Beach, and Santa Clarita—stand out as the best places to buy rental properties. Each brings unique strengths, whether it’s high rental yields, steady appreciation, or a mix of both.
Ready to dive in? Research your target city, crunch the numbers, and connect with local real estate pros to seal the deal. The Golden State’s rental market is waiting—where will you stake your claim?