Best Rental Markets In California To Buy A Rental Property
- By Sylvia Shalhout | Last updated February 7, 2022
A high return on investment is what every landlord desires. Its why many avoid buying a rental property in California. They think that, with the high property prices, it would be impossible to get a good ROI in this state.
However, Californias median property price is not as high as you might think. Its $680,686. While far above the national median of $226,300, its still in an attainable price range. Even better, the average return on investment for a California rental property is 1.6%. While you might not think thats impressive, remember its the average for the entire state. And there are certain cities where a landlord can rent out a property and make high monthly rental income and much better returns. Here are four of those Californian cities.
Note: Cities included in this list are those that have a population of over 100,000. The listed data is provided by Mashvisor. Data is from 2019.
Best Places To Invest In California Airbnb Rentals
Airbnb short-term rentals are another great real estate investment strategy. And since California is a top tourist destination, it makes sense to invest in Airbnb here. While itâs true that Airbnb California can be very profitable, California also has some of the toughest Airbnb laws and regulations. In most of the Golden State, buying an investment property for the purpose of renting it out as a vacation home on Airbnb is illegal! You can only rent out your house on Airbnb if youâre a California real estate investor and you already own your personal residence. There are, of course, more laws and regulations that you should look up before considering this rental strategy in the California housing market 2020.
Mashvisorâs Airbnb data shows that the following are the 5 best cities in California for Airbnb hosts in 2020:
#1. Winchester
- Monthly Airbnb Rental Income: $2,802
- Airbnb Occupancy Rate: 61.4%
- Airbnb Cap Rate: 6.4%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
What Makes A Place Favorable For Rental Property
When you invest in rental property to hold over the long-term, its important to look at the big picture and take into account the growth and demand for rental property in different real estate markets in the U.S.
Here are some of the key criteria that many investors believe can make a place good for rental property:
- Home value and median price indexes published by the National Association of Realtors and Zillow because higher housing prices can indicate a strong demand for rental property
- Growth in housing prices year-over-year and projected future price increases indicate how much property could appreciate.
- Historical annual growth in rents is a source used to help predict future increases or decreases.
- Rent index indicates whether rent increases are faster or slower than the rate of inflation, and also shows the supply and demand conditions for rental housing.
- Unemployment, job growth, and population growth rates indicate how strong the local economy is and the potential demand for housing.
- Cap rate measures the rate of return you receive from income property in different markets, although markets with high returns may not always be the best if economic conditions are declining.
- Gross rent multiplier compares gross rental income to property price, and the lower the GRM the quicker you will be able to pre-pay the mortgage own the property free and clear.
Recommended Reading: Family Offices Investing In Life Sciences
Understand The Expected Profit Margin
Avoid making a blind investment move. Crunch the numbers and know what to expect. After all, buying an investment rental property is a huge financial and emotional undertaking.
Broadly speaking, a good rate of return is usually about 10% annually. So, for an investment rental property worth $400,000, you should be able to make at least $40,000 in annual gross rental income.
Note, however, that the $40,000 isnt the expected profit. To calculate your profit margin, youll also need to factor in the expected operational expenses. Usually, expenses sum up to 1% of the value of an investment. Therefore, in this case, expenses would amount to around $4,000.
California Housing Market 2018
In order for a real estate investor to be truly successful in the real estate investing business, he/she should review the current housing market. Typically, you check whether the real estate market that you are interested in is a sellerâs market or a buyerâs market before investigating for the best places in California. In order to be a successful real estate investor, you should monitor the California housing market 2018. There are couples of reforms with regards to tax bills that are pending at the moment. It is possible that they have a quite significant impact on the market. Taxes in California real estate are already high, and after the reforms are accepted, there is a chance of them to increase even further. Consequently, a real estate investor who is planning on buying investment property now may leave the market in the future. Moreover, the real estate investor may expect that the period of living in a property before selling and getting tax reductions will increase. This has a direct effect on the number of homes on the market. Interested to learn more about the housing market in California? Make sure to read âCalifornia Housing Market 2018 Forecast â Whatâs the Deal?â.
You May Like: Umbrella Partnership Real Estate Investment Trust
Find The Best Rental Property In California Real Estate Market
We understand the difficulties real estate investors face while searching for the right investment property, and we offer the solution! Mashvisor helps property investors find the best investment properties in any city or neighborhood based on data analysis and real estate analytics. To find the best investment properties in any city in the California real estate market, make use of our:
Related: Mashvisor: A Real Estate Investing Tool for All Your Investment Needs
About The Turbotenant Report
The TurboTenant Report analyzes data from active listings across all 50 states, as well as third party real estate, population and employment growth data. Our goal with the TurboReport is to empower seasoned and novice investors to make wise purchasing decisions when purchasing a rental investment property. For more information or custom data requests, please contact .
Methodology:
In order to determine the best cities to invest in each state, we curated data from a number of reputable sources as well as using TurboTenant proprietary data. Our main city selections were taken from a study that evaluated four main factors for each city: employment growth, population growth, increase in home values and rental yield. We combined that with TurboTenant data on the average rent price, the number of rental leads per property, as well as the average number of days the rental stays on the market.
We also included an honorable mention where applicable. They are pulled from this study on the best places to invest in every state. These were determined using Zillows Buyer-Seller Index and Zillow Home Value Forecast, and AreaVibes Livability Score. Other methods for determining honorable mentions include using TurboTenant proprietary data to determine which cities return the best rental investment R.O.I. using data points including days on market, the number of leads per property, and average rent price.
Recommended Reading: Is Investing In Crypto Worth It
Home Values In Spokane Wa
Spokane is a city in Washington and consists of 28 neighborhoods. Homes for sale, range from $25K to $14.5M. Spokane has affordable townhomes.How hot is the Spokane housing market?According to data gathered by redfin.com, The Redfin Compete Score for Spokane is 87, making it a very competitive market.
*Redfin’s Compete Score rates how competitive an area is on a scale of 0 to 100, where 100 is the most competitive.Housing market HighlightsMany homes get multiple offers, some with waived contingencies.The average homes sell for about 2% above list price and go pending in around 7 days.Hot homes can sell for about 5% above the list price and go pending in around 3 days.Spokane, WA Housing MarketIn February 2022, the median listing home price in Spokane, WA was $400K, trending up 21.6% year-over-year. The median listing home price per square foot was $210. The median home sold price was $390K.
Spokane, WA is a seller’s market in February 2022, which means that more people are looking to buy than there are homes available
Rental Property Investing: San Jose Ca
The median property price in San Jose is $1,034,209 with a price per square foot of $668.40. Immediately you can see this is a city that youll want to invest and hold onto as its population and economy are thriving. San Jose has been called the Capital of Silicon Valley, which insinuates that its a high-tech employment field. The actual workforce is a bit more diverse but still full of high earners.
San Jose has high rental income potential making it one of the best West Coast cities to buy and hold in.
Read Also: Easy Investing Apps For Beginners
Best Cities For Foreign Investment In United States Real Estate
According to an old survey of the Association of Foreign Investors in Real Estate , the United States was deemed the number one country for planned real estate investment and the 5 best cities for foreign investment in United States real estate are:
- Los Angeles
- New York
- Seattle
- Washington, DC
- San Francisco
With 58% of respondents votes, the US remains the country considered the most stable for real estate investment, and 86% said they plan to maintain or increase their investment in US real estate.
What Is Real Estate Syndication
Real estate syndication is an alternative investment type, similar to real estate crowdfunding. Capital is pooled from multiple investors, allowing people to access high-value real estate deals with a low minimum investment amount. This gives everyday investors access to deals that would normally only be available to the wealthiest investors.
Unlike most real estate crowdfunding, real estate syndication offers a true ownership share in the underlying real estate. Gatsby will form and manage a separate limited liability company for each real estate investment opportunity. For each LLC, the investors are the joint members and owners of the LLC, and thus, will each hold an indirect economic interest in the underlying real property asset. With Gatsby, youre not just an investor in a fund youre an indirect owner of real property in which you want to specifically invest.
Also Check: Investment Property In Austin Tx
Best Places To Invest In California In 2020
Every real estate investor in the US knows that the California housing market is one of the toughest to break into. However, California is also known to be one of the best states to invest in real estate in 2020 when it comes to both long-term and short-term rental investments. For many years, the real estate market in the Golden State has provided wealth for investors and it still has great investment opportunities to offer in 2020. You just need to know where to find them. To help you out, we created this list of the best places to invest in California in 2020 based on Mashvisorâs real estate analytics and market research. To find out why and where to invest in California income properties this year, keep reading!
Buying A Vacation Home In California: Things To Consider
There are numerous compelling reasons for buying a vacation rental property. However, like with any significant financial choice, there is a great deal you should know before you invest.
For instance, did you know that mortgages for vacation houses and other non-primary houses fall under a separate category? Or that property maintenance fees for vacation rentals can be three times as high as those for long-term rentals?
With that in consideration, here are the advantages and disadvantages of purchasing a vacation home, as well as what you should know regarding taxes, finance, and other considerations before you begin looking for houses.
Don’t Miss: Vanguard Investment Management Development Program
Still Going Strong: Seattle Wa
Seattle, WA continues to be a strong city. The median property price is $614,035. Seattles high-tech economy and low unemployment rate fuel traditional real estate investing in the city. Job growth over the next 10 years is estimated at 11%, which is greater than the national average. Theyll be no shortage of tenants or buyers should you decide to flip a property.
Best Places To Invest In California In 2021
The California real estate market offers a wide range of opportunities for anyone who wants to buy a rental property
investment. With a population of 39.3 million, California is the most populous state in the US. Its economy consists of a wide range of industries including entertainment, agriculture, finance, health, manufacturing, and technology. It is home to Hollywood, the largest and oldest film industry in the world. The state is also home to the world-renowned Silicon Valley. With its moderate weather and scenic landscapes, California continues to attract local and international travelers all year round. If youâve been thinking about buying a California investment property or looking for the best places to invest in California, this guide is for you.
Related: 6 Most Affordable Cities in California for Real Estate Investing
Don’t Miss: Best Investment Plan For One Year
Panama City Beach Florida
In the vacation rental market of hot spots, Panama City Beach, Florida ranks at the top spots of the list at #4. The Panama City Beach area offers miles of walking and biking trails in Conservation Park and Gail’s Trails, plus some of the World’s Most Beautiful Beaches. There are two state parks in the city, almost 100 beach access points, waterfront restaurants with fresh local seafood, and many more attractions for tourists to indulge in. Fishermen, scuba divers, and boaters love the waters surrounding Panama City Beach.
Panama City Beach is a vacation destination that has different neighborhoods with something for everyone, whether they’re vacationers or homeowners. So you can find the type of house you prefer and target your ideal tenants.
What Are The Best Neighborhoods In Boise
Some of the best neighborhoods in or around Boise, Idaho are Southeast Boise, West Valley, and North End.
There are 32 neighborhoods in Boise. Warm Springs Mesa has a median listing home price of $1.5M, making it the most expensive neighborhood. Maple Grove – Franklin is the most affordable neighborhood, with a median listing home price of $390K.
You May Like: How To Get A Loan For Commercial Investment Property
California Housing Market Trends
Heres an overview of Californias unique housing market trends
- Low Affordability: If most residents in the area are putting more than 30 percent of their income toward housing, then that would be considered unaffordable. California is notorious for being an unaffordable place to live, due to the high cost of living. Higher than average wages put pressure on local housing markets to keep up. Without more affordable housing options, workers making lower wages will never be able to buy a house and become lifelong renters.
- Lack of Inventory: Local policies across the state wont allow urban sprawl and have strict policies on housing developments. This is a huge contributor to the lack of affordable homes available.
- High Rental Demand: Because home prices are so high in areas around California, a large demographic of people are forced to rent. Low inventory = high demand.
- Urban Flight is Happening: Since the pandemic, people are picking up and moving out of big cities and into the suburbs or to smaller towns. Several factors are driving this trend including, the ability to work remotely, more affordability and the desire to have outdoor/open space. After being cooped up in our homes for months, I think its safe to say most of us have a new appreciation for the value of liking where we live.
- Interest rates are low
The Real Estate Market In Sacramento California
Over the years,Sacramento has gained popularity among real estate investors and renters alike. Sacramento real estate has even appeared in many popular blogs and magazines that state its among the best places to buy rental property in all of California.
Sacramento real estate is fairly affordable,especially in comparison to San Francisco, with the majority of the households being renters. The housing market in Sacramento is usually in high demand making it a highly competitive market, but providing reliable revenue and real estate appreciation to investors due to the growing median property price.
Regardless of your preferences as a property investor, there are plenty of investment opportunities in the Sacramento real estate market. Whether you are looking to invest in an Airbnb, rental home, or vacation home, Sacramento will offer you more than enough opportunities, all with promising returns, a growing median price and healthy housing prices.
Recommended Reading: Do I Have To Be 18 To Invest In Stocks
Best Places To Invest In Rental Properties In California
When it comes to real estate investing markets, theres 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.
Los Angeles County San Pedro
According to Redfin, the average price of homes sold last month in San Pedro was $620,000, a 2.2 percent increase year-over-year. More than half of its residents rent instead of own. However, Zillow predicts that home prices in the San Pedro area will start to go down in the next few months. San Pedro is still a bit pricey, with average rents of $2,500.
Read Also: How To Invest In P2p Lending
