If you are looking for an easy and convenient way of entering the exciting world of real estate investing, buying a vacation home might be the right investment strategy for you.
Owning a vacation home is a great real estate investment opportunity as it serves a dual purpose: you spend your holidays in your favorite location, and you rent out your second home for the rest of the year in order to make money in real estate.
When talking about vacations and vacation homes, Californian is definitely one of the top locations which come to our mind. Thus, let’s explore together the best places to buy a vacation home in California.
How Do We Determine the Best Places to Buy a Vacation Home in California?
But first things first. Before we can find the best places to buy a vacation home in California, we have to decide what we mean by the “best places to buy a vacation home in California”. First of all, such a location has to be a favorite place for the real estate investor as he/she will be spending his/her holidays in this place.
Second, the location has to generate high return on investment for Airbnb rentals as the real estate investor will rent out his/her second home as an Airbnb rental property for the rest of the year.
Return on investment in real estate can be measured in various ways, including as rental income, cash flow, cap rate, cash on cash return, etc. In this article, we will focus on cap rate as the metric of profitability when determining the best places to buy a vacation home in California. In other words, these locations are the ones which yield the highest Airbnb cap rate in the State.
Cap rate is not only the most popular return on investment metric in real estate investing but also the simplest one to calculate and use. Unlike cash on cash return, the cap rate does not take into consideration the method of financing investment properties but focuses on the current market value of the investment property instead.
This is better in our case as each real estate investor will prefer a different financing method, whether to pay fully in cash or to take a mortgage loan.
How Do We Calculate the Cap Rate for the Best Places to Buy a Vacation Home in California?
The traditional answer is: through real estate market analysis. However, we live in the 21st century and don’t have to waste days and weeks and potentially even months to go around, collect data, and do manual calculations on spreadsheets to identity the most profitable locations for buying an investment property to rent out on Airbnb in California – i.e., the locations with the highest Airbnb cap rate.
Instead, we will use forecast from Mashvisor’s rental property calculator, which eliminates the need to conduct real estate market analysis as well as investment property analysis. This real estate investing tool uses traditional and predictive analytics to provide accurate and reliable forecasts of the main real estate metrics such as rental income, rental expenses, cash flow, cap rate, cash on cash return, occupancy rate, etc.
So, all numbers you will see below have been computed by Mashvisor’s investment property calculator.
To start your free 7-day trial with Mashvisor to explore the many benefits of using our investment property calculator and property search engine, click here.
What Are the Best Places to Buy a Vacation Home in California?
1. Meyers
- Median Property Price: $399,000
- Airbnb Rental Income: $5,880
- Airbnb Cap Rate: 14.4%
- Airbnb Cash on Cash Return: 14.4%
- Airbnb Occupancy Rate: 36.8%
- Traditional Rental Income: $1,840
- Traditional Cap Rate: 3.0%
- Traditional Cash on Cash Return: 3.0%
Meyers is a small unincorporated community in El Dorado County, with a population of 3,000 inhabitants, which happens to top the list of the best places to buy a vacation home in California. While the median property price is not particularly low, the average Airbnb rental income is high!!! This, as all real estate investors and other experts in the field know, leads to high return on investment in general and more than good cap rate in specific.
2. Orick
- Median Property Price: $137,000
- Airbnb Rental Income: $1,960
- Airbnb Cap Rate: 10.9%
- Airbnb Cash on Cash Return: 10.9%
- Airbnb Occupancy Rate: 41.7%
- Traditional Rental Income: –
- Traditional Cap Rate: –
- Traditional Cash on Cash Return: –
The 2nd place in our ranking of the best places to buy a vacation home in California is no less surprising for real estate investment traditionalists who tend to focus on big cities with hot real estate markets. Orick is a census-designated place with some 350 residents. Nevertheless, the average Airbnb cap rate is double-digit! The main reason? The highly affordable property prices.
3. Napa
- Median Property Price: $702,000
- Airbnb Rental Income: $8,260
- Airbnb Cap Rate: 8.6%
- Airbnb Cash on Cash Return: 8.6%
- Airbnb Occupancy Rate: 56.8%
- Traditional Rental Income: $2,650
- Traditional Cap Rate: 1.5%
- Traditional Cash on Cash Return: 1.5%
If you are a real estate investor who would rather invest his/her money in a rental property in a larger city, #3 in our list of the best places to buy a vacation home in California might be more appropriate for you. While investment properties in Napa are quite expensive on average, the expected Airbnb rental income is very, very high. This, as we know, results in high return on investment in terms of cap rate.
4. Twentynine Palms
- Median Property Price: $115,000
- Airbnb Rental Income: $1,460
- Airbnb Cap Rate: 7.8%
- Airbnb Cash on Cash Return: 7.8%
- Airbnb Occupancy Rate: 41.2%
- Traditional Rental Income: $820
- Traditional Cap Rate: 2.5%
- Traditional Cash on Cash Return: 2.5%
Have you heard of Twentynine Palms in San Bernardino County? If you are a real estate investor looking for the best real estate investment opportunities to make money, you better have! This is the 4th among the best places to buy a vacation home in California this year to rent out on Airbnb. Property prices are low, while the average Airbnb rental income is enough to result in an Airbnb cap rate of 7.8%.
Now, if you have been doing your real estate investing research and worked on your real estate education as a diligent investor, you must have read a thousand (or more) times that good cap rate is anything above 8-12%.
Yes, this is traditionally the case. However, we as modern real estate investors have to keep in mind that the world of real estate investing has become so competitive that anything about 5-6% should count as good cap rate.
5. Oakhurst
- Median Property Price: $315,000
- Airbnb Rental Income: $3,100
- Airbnb Cap Rate: 7.4%
- Airbnb Cash on Cash Return: 7.4%
- Airbnb Occupancy Rate: 40.7%
- Traditional Rental Income: $1,410
- Traditional Cap Rate: 1.7%
- Traditional Cash on Cash Return: 1.7%
Oakhurst is another small census-designated place and #5 in our ranking of the best places to buy a vacation home in California, based on data from Mashvisor’s rental property calculator. So, if you are wondering where to buy an investment property to rent out on Airbnb, do not miss this location.
6. Joshua Tree
- Median Property Price: $219,000
- Airbnb Rental Income: $2,300
- Airbnb Cap Rate: 7.1%
- Airbnb Cash on Cash Return: 7.1%
- Airbnb Occupancy Rate: 40.9%
- Traditional Rental Income: $970
- Traditional Cap Rate: 1.6%
- Traditional Cash on Cash Return: 1.6%
Still not sure where to buy a rental property? How about Joshua Tree, another census-designated place in San Bernardino County and #6 among the best places to buy a vacation home in California according to computations by Mashvisor’s investment property calculator.
In case you want to explore further the real estate investment opportunities in Joshua Tree, read our blog: “Investing in Joshua Tree Real Estate: An Unexpectedly Good Opportunity”.
7. McKinleyville
- Median Property Price: $362,000
- Airbnb Rental Income: $3,570
- Airbnb Cap Rate: 6.7%
- Airbnb Cash on Cash Return: 6.7%
- Airbnb Occupancy Rate: 40.0%
- Traditional Rental Income: –
- Traditional Cap Rate: –
- Traditional Cash on Cash Return: –
If you would rather be buying an investment property in a location with population of above 15,000 residents, you can consider McKinleyville. This comes as #7 in our list of the best places to buy a vacation home in California.
8. Salinas
- Median Property Price: $497,000
- Airbnb Rental Income: $4,570
- Airbnb Cap Rate: 6.6%
- Airbnb Cash on Cash Return: 6.6%
- Airbnb Occupancy Rate: 55.5%
- Traditional Rental Income: $
- Traditional Cap Rate: 1.4%
- Traditional Cash on Cash Return: 1.4%
If, on the other hand, you are looking for a location with population above 150,000 residents to invest in real estate and start making money from real estate investing, how about Salinas? This municipality in Monterey County is the 8th among the best places to buy a vacation home in California at the moment. This is the result of high Airbnb rental income, which compensates for the not low property prices.
9. Mariposa
- Median Property Price: $329,000
- Airbnb Rental Income: $2,990
- Airbnb Cap Rate: 6.6%
- Airbnb Cash on Cash Return: 6.6%
- Airbnb Occupancy Rate: 48.0%
- Traditional Rental Income: $960
- Traditional Cap Rate: 0.2%
- Traditional Cash on Cash Return: 0.2%
If you don’t mind investing in real estate in a location with population of just above 2,000 people, then you should further explore Mariposa in Mariposa County. After all, who does not want to buy and own a vacation home in a place the name of which means “butterfly” in Spanish?!
Mariposa is #9 in our ranking of the best places to buy a vacation home in California for Airbnb cap rate, based on data from Mashvisor’s rental property calculator.
10. Yucca Valley
- Median Property Price: $246,000
- Airbnb Rental Income: $2,090
- Airbnb Cap Rate: 6.0%
- Airbnb Cash on Cash Return: 6.0%
- Airbnb Occupancy Rate: 42.7%
- Traditional Rental Income: $1,660
- Traditional Cap Rate: 3.9%
- Traditional Cash on Cash Return: 3.9%
Mashvisor’s investment property calculator, an advanced real estate investing tool, thinks that buying a rental property in Yucca Valley, an incorporated town in San Bernardino County, is another excellent choice. Traditional and predictive analytics rank it as the 10th among the best places to buy a vacation home in California at the moment.
11. North Park
- Median Property Price: $350,000
- Airbnb Rental Income: $2,990
- Airbnb Cap Rate: 6.0%
- Airbnb Cash on Cash Return: 6.0%
- Airbnb Occupancy Rate: 61.8%
- Traditional Rental Income: $1,650
- Traditional Cap Rate: 1.7%
- Traditional Cash on Cash Return: 1.7%
Last but not least, real estate investors who want to make use of traditional and predictive real estate analytics can choose to buy an investment property in North Park to use as a second home and as an Airbnb rental property.
North Park is an excellent choice for those who would rather invest in real estate in large cities as it is practically a neighborhood of San Diego, by far the largest in our list of the best places to buy a vacation home in California this year.
If there is one more thing you should learn from this blog – other than the best places to invest in real estate – it is that the top locations to buy an investment property do not have to be in the major cities and the hot real estate markets.
Indeed, such locations are frequently bad places to invest in real estate as properties are few, real estate is overpriced, and investment opportunities are limited. Sometimes the best real estate gems are located in small, quiet places.
Now that you have the 11 best places to buy a vacation home in California according to data from Mashvisor’s investment property calculator, you have no reason to delay buying a rental property and starting making money in real estate.
To start looking for the best real estate investment properties in each of these locations, click here.