Best Cities for Real Property for Rent in California
California's top locations for rental property investments There is a long list of states that are currently seeing booms in popularity when it comes to real estate investing markets. Despite the fact that Texas, Florida, Arizona, North Carolina, and other states are great places to look for new homes, California appears to outpace them all in terms of sheer volume and continues to draw people from across the nation, both to live in and to invest in real estate.
California might be among the best places to buy a rental property, if not the best. Let's examine the Golden State as a site for investments.
Investments in rental properties are a fantastic method to increase wealth and equity. Your odds of making money, though, depending on where you invest.
This blog will study the California real estate market in more detail and explain why it is a suitable rental property investment location.
Despite the fact that California is still one of the most well-known states in the US, not all real estate investments may be suitable for you. There may be a California area that is more appropriate for you than another one depending on your spending limit, return goals, and maintenance capabilities.
The economy is booming and there are many different industries in the diversified state of California. It offers everything, attracting both local and foreign visitors to every corner, from movie sets to financial businesses. How do you choose the ideal location to purchase a rental property in this area, then? Where in California are the greatest spots to invest in 2023?
Finding the best location in California to invest in real estate may be challenging given the abundance of options available. Don't worry; this guide is for you if you've been looking for the best places to buy California investment properties this year.
The value of the California real estate market.
Let's examine the viability of the California housing market before determining where to buy a 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 that investors see are on an entirely different level.
According to a recent report from the California Association of Realtors (CAR), home prices will rise 5.2% through 2023. Additionally, it anticipates a decrease in housing affordability of 23% the following year, up from a projected 26% in 2021.
This indicates that you will probably experience a greater real estate appreciation on your property over the next few years simply by investing in California income properties as opposed to properties in another state. The initial higher cost may be offset by the potential return on investment (ROI).
Additionally, California's diversified cultural industries and state regulations provide their investors with a number of advantages, including the following:
expanding labor market
California continues to rank in the top 10 states for job prospects in 2022 and 2023 despite COVID-19's disruption of nearly every industry. Furthermore, the University of California Riverside (UCR) reports that in September 2022, the California job market will still be growing, albeit more slowly.
California's unemployment rate as of September 2022 was 3.9%, which is still high when compared to the 3.5% rate for the entire US.
Going into the US housing market of 2023, California should continue to experience a high demand for rental units. The state should be the ideal spot to buy a rental property because of the sustained strength in rental demand.
High Demand for Rentals and Rising Rental Prices
One would assume that rental costs would need to be reduced in order to attract renters given the on-again, off-again surges of COVID-19. But in the real estate market in California, this is not the case.
California rental rates increased 22.04% from August of last year to August of this year. This reflects the significant demand in California for long-term rental properties. Investors should seize this chance to increase their returns on investment as a result of the rise in rental prices.
According to data gathered and examined by Mashvisor, a market-leading platform for real estate data analytics, California's average monthly rental income as of October 2022 was $3,176. The amount is considerably higher than the national average.
Property Value Increase
All of California's top investment locales experience a yearly growth in market value for real estate. In 2022, it was anticipated that statewide median home prices would increase by 5.2%. It means that when and if investors decide to sell their property, they can nearly always expect to get a sizable profit relative to the price at which they initially bought it.
According to Mashvisor, the median home price in the California real estate market as of October 2022 is $903,256. You can anticipate a significant increase in the value of your income property over the course of the following 12 months, given an anticipated appreciation of 5.2% going into 2023.
With such a positive increase in value, California effectively establishes itself as the best state best location to purchase a rental property.
Is the California Exodus Something to Worry About?
The California Exodus as a result of the COVID-19 outbreak has received a lot of attention. People are leaving California in record numbers, which lowers the value of the state's real estate. Investors are still worried about this as we get ready to enter 2023.
Studies have revealed that statistically speaking, the number of people leaving California compared to pre-pandemic times has not changed significantly.
Studies have shown that the population of California has decreased as a result of residents leaving the state because of the epidemic, but the impact has not been very significant. In 2016, 16% of residents of California departed the state. There were about 352,000 fewer residents in the state between April 2020 and September 2022.
Even though the number of residents leaving the state is rising, analysts are confident that this won't have a negative impact on California's real estate market. The state's standing as the best place to buy a rental property in 2023 won't be harmed by this trend.
In order to make its real estate value enticing to investors, California continues to attract millions of businesspeople and corporations. In fact, the end of 2022 and the beginning of 2023 are predicted to see a 5.2% increase in house values in the California real estate market.
Because California generally still has a very strong real estate market, in such a scenario, you can profit from a sizable return on investment in the best places to invest there.
This being said, the California Exodus shouldn't be a major worry or deciding factor if you're looking to invest in California-income properties.
California's long-term versus the short-term rental market in 2023
Given the potential for significant returns, many investors are trying to figure out where in the Golden State is the greatest spot to invest in real estate. Depending on a variety of criteria, individual investors may have different preferences for the greatest California investment opportunities 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 fully benefit from the best rental market in California.
While each has advantages, picking one over the other can significantly affect your investment returns. Before purchasing an investment property in California for both long-term and short-term rentals, keep the following in mind:
Availability Rate
The major objective while owning a rental property, whether it is a long-term or a holiday rental property, is to find consistent renters so you can make money. As long-term leases are often signed for at least a year, investors will typically observe consistent occupancy.
On the other side, seasonal short-term rentals are available. It implies that the property might occasionally go unoccupied while at other times profiting from a strong short-term rental demand.
Locations with a stronger long-term rental market might be a better option for you if you're looking for an occupancy rate that is more consistent and predictable.
Total Income
While investing in a short-term rental property may need a little more work, it has the potential to bring in more money than a long-term rental property. An annual fixed price will be applied to each month's rent for a long-term rental property.
Contrarily, a California short-term rental property has the potential to bring in more rental income because you may typically charge more each night, depending on the season.
Profit from Investment
What rate of return an income property offers to generate should be the deciding factor in any real estate investment decision.
Long-term versus short-term rental properties produce highly varied returns on investment even within the same city and even neighborhood. To achieve the most return, you should study the community and the investment property before choosing a rental strategy.
The key figures on the California rental market that every investor should consider before purchasing an investment property are included below. These were derived from data from Mashvisor as of October 2022:
- Median Property Price: $903,256
- Average Price per Square Foot: $647
- Days on Market: 67
- Number of Long Term Rental Listings: 44,827
- Monthly Long Term Rental Income: $3,176
- Long Term Rental Cash on Cash Return: 2.48%
- Long Term Rental Cap Rate: 2.50%
- Price to Rent Ratio: 24
- Number of Short Term Rental Listings: 74,041
- Monthly Short Term Rental Income: $4,412
- Short Term Rental Cash on Cash Return: 3.20%
- Short Term Rental Cap Rate: 3.23%
- Short Term Rental Daily Rate: $234
- Short Term Rental Occupancy Rate: 55%
- Walk Score: 50
20 of California's Best Investment Locations for 2023
Long-term and short-term rentals like Airbnb continue to be very profitable in California. While both real estate investment strategies will undoubtedly result in a profit, not all locations with a healthy long-term renter market also attract guests for short-term rentals, and the opposite is also true.
Mashvisor's real estate data makes it simple to break down all the important factors to make the best choice when looking for the best places to invest in California.
The Mashvisor long term and short term rental data analytics are here to help, regardless of the type of rental strategy you're planning to implement!
The locations on the list below are those in the California real estate market that give the highest long- or short-term rental cash-on-cash return.
The top 10 California locations for long-term rental property investments in 2023
According to data from Mashvisor from October 2022, the following areas in California are the best places to purchase a long-term rental property:
1. Redlands
- Median Property Price: $678,440
- Average Price per Square Foot: $375
- Days on Market: 64
- Number of Long Term Rental Listings: 143
- Monthly Long Term Rental Income: $2,822
- Long Term Rental Cash on Cash Return: 2.98%
- Long Term Rental Cap Rate: 3.01%
- Price to Rent Ratio: 20
- Walk Score: 85
2. Palm Springs
- Median Property Price: $998,098
- Average Price per Square Foot: $536
- Days on Market: 57
- Number of Long Term Rental Listings: 198
- Monthly Long Term Rental Income: $3,708
- Long Term Rental Cash on Cash Return: 2.92%
- Long Term Rental Cap Rate: 2.97%
- Price to Rent Ratio: 22
- Walk Score: 59
3. Riverside
- Median Property Price: $651,637
- Average Price per Square Foot: $393
- Days on Market: 55
- Number of Long Term Rental Listings: 384
- Monthly Long Term Rental Income: $2,779
- Long Term Rental Cash on Cash Return: 2.86%
- Long Term Rental Cap Rate: 2.90%
- Price to Rent Ratio: 20
- Walk Score: 36
4. Hawthorne
- Median Property Price: $964,499
- Average Price per Square Foot: $667
- Days on Market: 49
- Number of Long Term Rental Listings: 101
- Monthly Long Term Rental Income: $3,984
- Long Term Rental Cash on Cash Return: 2.80%
- Long Term Rental Cap Rate: 2.82%
- Price to Rent Ratio: 20
- Walk Score: 87
5. Santa Ana
- Median Property Price: $836,867
- Average Price per Square Foot: $555
- Days on Market: 62
- Number of Long Term Rental Listings: 207
- Monthly Long Term Rental Income: $3,466
- Long Term Rental Cash on Cash Return: 2.71%
- Long Term Rental Cap Rate: 2.74%
- Price to Rent Ratio: 20
- Walk Score: 97
6. Santa Clarita
- Median Property Price: $783,397
- Average Price per Square Foot: $462
- Days on Market: 50
- Number of Long Term Rental Listings: 200
- Monthly Long Term Rental Income: $3,304
- Long Term Rental Cash on Cash Return: 2.64%
- Long Term Rental Cap Rate: 2.66%
- Price to Rent Ratio: 20
- Walk Score: 27
7. Thousand Oaks
- Median Property Price: $983,507
- Average Price per Square Foot: $536
- Days on Market: 44
- Number of Long Term Rental Listings: 276
- Monthly Long Term Rental Income: $3,857
- Long Term Rental Cash on Cash Return: 2.63%
- Long Term Rental Cap Rate: 2.65%
- Price to Rent Ratio: 21
- Walk Score: 66
8. Simi Valley
- Median Property Price: $823,789
- Average Price per Square Foot: $467
- Days on Market: 64
- Number of Long Term Rental Listings: 122
- Monthly Long Term Rental Income: $3,444
- Long Term Rental Cash on Cash Return: 2.62%
- Long Term Rental Cap Rate: 2.65%
- Price to Rent Ratio: 20
- Walk Score: 79
9. Pomona
- Median Property Price: $658,357
- Average Price per Square Foot: $2,245
- Days on Market: 58
- Number of Long Term Rental Listings: 207
- Monthly Long Term Rental Income: $2,756
- Long Term Rental Cash on Cash Return: 2.61%
- Long Term Rental Cap Rate: 2.65%
- Price to Rent Ratio: 20
- Walk Score: 75
10. Anaheim
- Median Property Price: $825,103
- Average Price per Square Foot: $538
- Days on Market: 53
- Number of Long Term Rental Listings: 455
- Monthly Long Term Rental Income: $3,397
- Long-Term Rental Cash on Cash Return: 2.51%
- Long-Term Rental Cap Rate: 2.53%
- Price to Rent Ratio: 20
- Walk Score: 51
The top 10 Californian locations for short-term rental property investments in 2023
Here are the top areas in California to purchase properties for short-term rentals this year:
1. Riverside
- Median Property Price: $651,637
- Average Price per Square Foot: $393
- Days on Market: 55
- Number of Short Term Rental Listings: 205
- Monthly Short Term Rental Income: $4,991
- Short Term Rental Cash on Cash Return: 4.92%
- Short Term Rental Cap Rate: 4.99%
- Short Term Rental Daily Rate: $216
- Short Term Rental Occupancy Rate: 57%
- Walk Score: 36
Search for short term rental properties in Riverside, CA here.
2. Visalia
- Median Property Price: $443,504
- Average Price per Square Foot: $235
- Days on Market: 55
- Number of Short Term Rental Listings: 153
- Monthly Short Term Rental Income: $3,288
- Short Term Rental Cash on Cash Return: 4.75%
- Short Term Rental Cap Rate: 4.86%
- Short Term Rental Daily Rate: $142
- Short Term Rental Occupancy Rate: 55%
- Walk Score: 48
3. Escondido
- Median Property Price: $881,536
- Average Price per Square Foot: $469
- Days on Market: 60
- Number of Short Term Rental Listings: 131
- Monthly Short Term Rental Income: $6,264
- Short Term Rental Cash on Cash Return: 4.63%
- Short Term Rental Cap Rate: 4.68%
- Short Term Rental Daily Rate: $344
- Short Term Rental Occupancy Rate: 51%
- Walk Score: 42
4. Anaheim
- Median Property Price: $825,103
- Average Price per Square Foot: $538
- Days on Market: 53
- Number of Short Term Rental Listings: 786
- Monthly Short Term Rental Income: $5,952
- Short Term Rental Cash on Cash Return: 4.54%
- Short Term Rental Cap Rate: 4.57%
- Short Term Rental Daily Rate: $270
- Short Term Rental Occupancy Rate: 64%
- Walk Score: 51
5. Santa Fe Springs
- Median Property Price: $695,130
- Average Price per Square Foot: $534
- Days on Market: 57
- Number of Short Term Rental Listings: 187
- Monthly Short Term Rental Income: $5,195
- Short Term Rental Cash on Cash Return: 4.46%
- Short Term Rental Cap Rate: 4.52%
- Short Term Rental Daily Rate: $176
- Short Term Rental Occupancy Rate: 64%
- Walk Score: 78
Related: How to Estimate Vacation Rental Income
6. Bakersfield
- Median Property Price: $440,130
- Average Price per Square Foot: $535
- Days on Market: 54
- Number of Short Term Rental Listings: 289
- Monthly Short Term Rental Income: $3,175
- Short Term Rental Cash on Cash Return: 4.42%
- Short Term Rental Cap Rate: 4.53%
- Short Term Rental Daily Rate: $168
- Short Term Rental Occupancy Rate: 56%
- Walk Score: 28
7. Paramount
- Median Property Price: $628,412
- Average Price per Square Foot: $469
- Days on Market: 132
- Number of Short Term Rental Listings: 193
- Monthly Short Term Rental Income: $4,605
- Short Term Rental Cash on Cash Return: 4.40%
- Short Term Rental Cap Rate: 4.46%
- Short Term Rental Daily Rate: $190
- Short Term Rental Occupancy Rate: 63%
- Walk Score: 89
8. Chula Vista
- Median Property Price: $784,108
- Average Price per Square Foot: $452
- Days on Market: 57
- Number of Short Term Rental Listings: 251
- Monthly Short Term Rental Income: $5,500
- Short Term Rental Cash on Cash Return: 4.15%
- Short Term Rental Cap Rate: 4.20%
- Short Term Rental Daily Rate: $271
- Short Term Rental Occupancy Rate: 60%
- Walk Score: 29
9. Hawaiian Gardens
- Median Property Price: $888,967
- Average Price per Square Foot: $478
- Days on Market: 37
- Number of Short Term Rental Listings: 166
- Monthly Short Term Rental Income: $4,830
- Short Term Rental Cash on Cash Return: 4.12%
- Short Term Rental Cap Rate: 4.17%
- Short Term Rental Daily Rate: $187
- Short Term Rental Occupancy Rate: 68%
- Walk Score: 90
10. Sacramento
Attempts at property management
The majority of individuals purchase investment homes to generate passive income, but maintaining and managing both long-term and short-term rentals still requires some effort.
However, compared to long-term rental homes, short-term rentals do require far more daily maintenance. For every new visitor, short-term rentals must be fully furnished and cleaned several times a month.
Long-term rentals, however, may be relatively unfurnished and require less monthly upkeep from the investor. Short-term rentals might not be the best approach for you if you prefer a more hands-off investment.
Before you set out to purchase an investment property to use as a rental property, take this into account.
Proposition 13 and low taxes
It is 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 tax properties are restricted to just 1% of the total market value of your property and are subject to a 2% increase cap every year because of the law known as Proposition 13.
Investors are more likely to see a profit when they purchase investment properties in California because of the low and controlled property taxes. Due to this, both novice and seasoned investors will find purchasing investment properties to be even more appealing.
the historical context of the California market
Los Angeles, San Diego, and San Francisco are just a few of the state's densely populated major centers. California has been the nation's most populous state for the past 60 years. One of the most alluring states for real estate investors, its attractiveness and dense population have contributed to some of the highest property prices in the country.
40 Best Cities to Invest in Real Estate 2023
What makes California so well-liked?
The image of California, and especially Los Angeles, is one of an idyllic place with miles of gorgeous beaches, year-round perfect weather, and fame around every corner. California has always been a melting pot of cultures and ideas and has developed into a hub of some of the biggest employers in the country, particularly in technology. However, this can vary greatly depending on where you are in the state.
A foodie's paradise, California also has a sizable agricultural sector that generates an enormous variety of foods. Additionally, the state has more national parks than any other and offers a wide variety of weather, landscapes, and tourist attractions. With all of these contributing factors, it is simple to see why so many people would want to relocate to California and experience all that it has to offer, or would simply want to plan a vacation there.
California cities to invest in real estate
Therefore, California has a large population. How can you profit from this? Numerous towns and localities in the state have seen a rise in the value of rental properties recently. While California cities didn't quite make our Top 10, there are still a lot of exciting opportunities for investment properties. We talked about the best cities in the nation for real estate investing in 2022. This is why it's crucial to do your homework and choose the ideal area to invest in because it could mean the difference between a profitable rental and one that sits empty.
In Los Angeles
There is a reason LA is contributing to California's enormous population surges, which is perhaps not surprising. Los Angeles and its vast metro area typically come to mind when most people think of California (or even the west coast). In addition to being a hugely diverse city with quick getaways to stunning natural beauty nearby, LA also has neighboring cities that can provide a variety of environments and characteristics to suit your investing style.
As an illustration, Huntington Beach, one of the best vacation destinations in the nation, is the ideal location for a brand-new vacation rental. Due to its high rate of renter-occupied households compared to the rest of California, Hawthorne is another example of a city in the LA metro area with a tonne of value for investors.
Anaheim
Anaheim is one of the best regions in California for short-term rentals because of its thriving tourism industry, despite being a part of the LA metropolitan area. This city, which is home to Disneyland and Knott's Berry Farm, has a very high rental demand, which drives up rent significantly (to upwards of $3,000). Even though the initial investment for any properties in the LA area may be high, Anaheim rentals will have no trouble recovering these costs.
Sacramento
Sacramento, the state capital of California, is frequently disregarded and undervalued. However, because of its high price-to-rent ratio, most people will probably choose to rent a home rather than purchase one. Due to this trend, landlords have plenty of demand to rent out their properties all over the city. Sacramento can be a hidden gem, which is easy to understand given the area's serene landscapes, nearby vineyards, and breweries.
Los Angeles/San Francisco
The San Francisco Bay Area and two important cities for real estate investing are located just southwest of Sacramento. This region's renter wages increased by 18% in 2021, and the area's low unemployment rate encourages long-term tenancy. While real estate in San Francisco is significantly more expensive than in Oakland (often by a factor of two), the city's economy and job market are also significantly more expensive. Oakland also offers fantastic opportunities for renting to commuters or people working outside of San Francisco if you're looking for a lower initial investment.
Florida Desert
Palm Springs provides the perfect blend of the California lifestyle because it is located inland between Los Angeles and San Diego. It offers an opulent ambiance that makes it possible to charge greater rent and provide many high-end amenities. Palm Springs is able to cater to the holiday and short-term rental markets as it has grown to be a popular vacation spot.
Los Angeles
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. In addition, the city has a thriving art scene and more than 70 miles of stunning coastline. These elements, along with the fact that renter wages will rise significantly in 2021, indicate that the rental market is poised for further expansion, which investors can benefit from.
Using Visio, finance your California rental
When you have chosen the location for your next rental, work with the market leader in rental loans to finance your purchase. We provide flexible terms and have a tonne of market knowledge from closing hundreds of loans in California over the last few years.