When it comes to real estate investing markets, there’s a long list of states currently experiencing booms in popularity. While Texas, Florida, Arizona, North Carolina, and more are all fantastic areas to look for new properties, California seems to top them all in sheer volume and continues to draw people from all over the country — both to live and invest.
Background of the California market
California has been the most populous state in the country for 60 years and has dense city centers like Los Angeles, San Diego, and San Francisco. Its allure and crowded population have led to some of the highest housing prices in the United States as well, making it one of the most eye-catching states for real estate investors.
Why is California so popular?
The stereotype of California (particularly LA) seems idyllic, with beautiful beaches for miles, perfect weather year-round, and fame on every corner. While this can vary a lot depending on where you are in the state, California has always been a melting pot of cultures and ideas and has become a hub of some of the biggest employers in the country, particularly in technology.
California also has a huge agricultural economy that produces a massive variety of foods that make it a foodie’s dream. The state is also home to more national parks than any other, and has countless different climates, environments, and sights to see. With all of these factors, it’s easy to understand why so many people would want to move to California and experience what it has to offer, or simply plan to visit the state for a vacation.
Top California cities for real estate investors
So there are a lot of people in California, how can you capitalize on this? There are a number of cities and areas in the state that have been trending upwards in terms of rental investing value. We discussed the top cities in the country for real estate investing in 2022, and while California cities didn’t quite make our Top 10, there are plenty of exciting opportunities for investment properties. This is why it’s important to do your research and pick the right location to invest in — it could mean the difference between a successful rental and a vacant one.
While probably unsurprising, there’s a reason LA is helping to drive California’s huge population increases. When most people think of California (or even the west coast), they typically think of Los Angeles and its huge metro area. Not only is LA proper an incredibly diverse city with quick escapes to beautiful nature nearby, but it has adjacent cities that can offer varied environments and characteristics to fit your investing style.
For instance, Huntington Beach is one of the best vacation spots in the country and is a perfect place for a new vacation rental. Hawthorne is another example of an LA metro area city with tons of value for investors due to its high renter-occupied household rate compared to the rest of California.
While still part of the LA metropolitan area, Anaheim is one of the best areas of California for short-term rentals due to its tourism market. Home to Disneyland and Knotts Berry Farm, this city has an incredibly high demand for rentals, which leads to much higher rent (upwards of $3,000). While the initial investment might be high for any properties around LA, Anaheim rentals will have no issues recouping these costs.
The capital of California, Sacramento can be overlooked and underrated by many people. However, its high price-to-rent ratio means that most people are likely to rent rather than buy a property. This trend gives rental investors plenty of demand to fill their properties across the city. Coupled with the area’s serene landscapes and surrounding vineyards and breweries, it’s not hard to see why Sacramento can be a hidden gem.
Just southwest of Sacramento lies the San Francisco Bay Area and two major cities for real estate investing. Renter wages in this region increased by 18% in 2021, and the area has a low unemployment rate, which lends itself to long-term renting. While properties in San Francisco are significantly more expensive than Oakland (sometimes twice as much), the city has a perpetually-growing economy and job market to match these prices. If you’re looking for a lower initial investment, Oakland also has great opportunities for renting to commuters or people working outside of San Francisco.
Palm Springs sits inland between Los Angeles and San Diego and gives an ideal balance of the California lifestyle. It has a luxurious atmosphere that allows for higher rent prices and plenty of high-end amenities. Palm Springs has also become a highly sought-after vacation destination, meaning it can serve the vacation and short-term rental market.
South of Palm Springs, San Diego has plenty of entertainment — from the San Diego Zoo and SeaWorld to the Padres MLB team. The city also has a thriving art scene and over 70 miles of beautiful coastline. These factors, in combination with renter wages increasing significantly in 2021, mean that the rental market is primed for further growth that investors can take advantage of.
Finance your California rental with Visio
Once you’ve decided where you want to buy your next rental, partner with Visio Lending for your next investment property loan. We offer flexible terms and have plenty of experience in the California market, closing hundreds of loans in the state over the past few years.