Finding the best short term rental markets in California, as well as the ones for traditional rentals, is easy if you know how to find them.
Table of Contents
The late Tupac Shakur once quoted old-school hip hop artist Ronnie Hudson: “California knows how to party.” And party, indeed, is what California is known for. The term Wild West takes on a whole different meaning when it comes to the Golden State.
It may be commonly known for its Hollywood glitz and glamor, but California has a whole lot more to offer. This makes investing in the best rental markets in California a wise and rewarding move for real estate investors.
If you’re looking for the best traditional rental markets or the best short term rental markets in the country, California will never disappoint.
However, investing in real estate on the West Coast is not something investors and business-minded individuals should take lightly. California properties are quite expensive, and so is the cost of living.
Before you pull the trigger, you need first to identify the best real estate market in California that aligns with your investment goals.
Despite the high standard of living in CA, it is still possible for real estate investors to find the best rental markets in California that will give them attractive returns. It is particularly true if you’re using a real estate platform like Mashvisor to look for affordable houses in the most promising CA locations.
So, let’s take a quick look at the California real estate market and see why buying an investment property on the West Coast is something you should consider.
A Closer Look at the California Real Estate Market
People who want to get into California real estate investing need to understand what they’re getting into.
First, it’s no secret that California is one of the most expensive states to live in. This includes the housing market. Real estate is quite expensive in the Golden State because there’s just not enough housing to go around, given the very high demand for property.
Second, given the lack of supply, CA is one of the more expensive states to build houses. Don’t think that nobody ever thought of building more homes to meet the ridiculously high demand. The state’s Housing Department claims they need to build 180,000 houses every year just to meet the demand.
It is a huge challenge to developers because the cost of labor and materials in CA is also very expensive. And while they did attempt to hit the 180,000-mark, they could only pull off half of it at best.
Third, even if CA developers churn out 180,000 houses yearly, there’s just not enough land available. California may be the third-largest state in size, but a large portion comprises hills and mountains spread across the harshest deserts. Almost every suitable parcel of land has already been used.
Fourth, stricter building codes and a push for more environmentally friendly homes have made already-high construction costs even more expensive.
Given all of these factors, one would probably think of giving up on real estate investing in the state. However, despite all these setbacks, it is still quite possible for an investor to make a good return on investment as long as they know where the best real estate investments in California are found.
Why Are Real Estate Investors Attracted to California?
Despite the financial, geographical, and physical challenges of owning a California property, why do investors keep coming back?
Vibrant and Thriving Economy
California is home to several Fortune 500 companies, including Disney, Google, Apple, Intel, and Oracle. The increase in demand for their products and services means that growth is inevitable for these companies. This translates to business expansions and more job opportunities.
The low unemployment rate means that landlords and property owners have greater security since tenants can make timely payments. It also makes the state very attractive for professionals and families to move to.
Very Strong Tourism
It should come as no surprise to find out that CA attracts millions of visitors annually.
Entertainment hotspots, amusement parks, white sandy beaches, perfect weather, beautiful people, awesome activities, and a whole lot more bring in huge revenues in local tourism. They make the idea of investing in short-term rental properties a lot more attractive to investors in and out of the state.
High Property Demand
As we already mentioned earlier, there is a very high demand for property in California and very little room for expansion and new development. With thousands of professionals coming daily looking for better job opportunities, rental properties are at a premium in the state.
Investors just have to look for the best housing markets in California that will help them achieve their goals.
Favorable Tax Rates
California may be an expensive state to live in but compared to smaller states like Washington and New Jersey, the state’s property taxes are friendly to landlords. The low tax rates help improve an investor’s cash flow, making it one of the reasons why California is a great place to invest in.
Property Value Appreciation
Generally, real estate is a sound investment because it will almost always appreciate over time. However, a wise investor knows where to look for a property that will bring in greater financial rewards.
Given the different factors that affect California real estate, the appreciation rates are much higher compared to other states.
The Top California Rental Markets for Investors
While there are several sound investment strategies for real estate investors, we will focus on the rental aspect of investing. Based on the data found on Mashvisor’s website, we’ve come up with the following list of ideal markets for traditional and short-term rentals.
Both lists were taken from Mashvisor’s September 2022 data and ranked from highest to lowest according to a location’s cash on cash return. Each list was filtered thoroughly to only reflect markets with:
- A median property price of below $1 million
- At least 100 listings (both traditional and vacation rental properties) on the market
- A minimum of $2,000 in monthly rental income
- A 2.00% and higher cash on cash return
- A price to rent ratio of at least 20 for the traditional rental market
- An Airbnb occupancy rate of no less than 50% for short term rentals
Take a look at each of them and see if it is the best housing market in California for you.
7 Best Markets for Traditional Rentals in California
Based on Mashvisor’s September 2022 location report, here are the best rental markets in California where traditional properties are concerned:
1. Palm Springs
- Median Property Price: $976,403
- Average Price per Square Foot: $522
- Days on Market: 58
- Number of Traditional Listings: 172
- Monthly Traditional Rental Income: $3,706
- Traditional Cash on Cash Return: 2.92%
- Traditional Cap Rate: 2.96%
- Price to Rent Ratio: 22
- Walk Score: 59
Palm Springs is a very livable city with its warm and pleasant weather all year round, making it one of the best rental markets in California. It is a great place to move to for people looking for a lifestyle change. Although housing is on the expensive side, investing in Palm Springs real estate can be one of the most financially rewarding decisions you’ll make.
2. Redlands
- Median Property Price: $728,127
- Average Price per Square Foot: $365
- Days on Market: 65
- Number of Traditional Listings: 141
- Monthly Traditional Rental Income: $2,811
- Traditional Cash on Cash Return: 2.77%
- Traditional Cap Rate: 2.81%
- Price to Rent Ratio: 22
- Walk Score: 85
Its growing economy and population make Redlands in San Bernardino County an attractive place for investors. A very decent cash on cash return of 2.77% and a high price to rent ratio of 22 indicate that Redlands is a good place for traditional rental property investments. A homeownership rate of 58.9% shows that there is a huge demand for rental properties.
3. Santa Ana
- Median Property Price: $872,917
- Average Price per Square Foot: $554
- Days on Market: 76
- Number of Traditional Listings: 215
- Monthly Traditional Rental Income: $3,725
- Traditional Cash on Cash Return: 2.72%
- Traditional Cap Rate: 2.75%
- Price to Rent Ratio: 20
- Walk Score: 97
Santa Ana is one of the best places to live in the Golden State. Its diverse population and natural beauty make it a top candidate for home buyers and those seeking to move to the West Coast. Despite rental prices being on the higher side, the vacancy rate in Santa Ana is quite low, mainly due to its cultural diversity, growing economy, and pleasant sunny weather.
4. Simi Valley
- Median Property Price: $835,147
- Average Price per Square Foot: $467
- Days on Market: 58
- Number of Traditional Listings: 115
- Monthly Traditional Rental Income: $3,431
- Traditional Cash on Cash Return: 2.61%
- Traditional Cap Rate: 2.64%
- Price to Rent Ratio: 20
- Walk Score: 79
Simi Valley is the perfect place for individuals and families looking for the right balance of California living. This seemingly-expensive community offers residents an affordable yet luxurious experience, allowing them to enjoy the best of both worlds. It’s one of the best rental markets in California because it offers investors amenities that can boost growth.
5. Anaheim
- Median Property Price: $856,771
- Average Price per Square Foot: $545
- Days on Market: 61
- Number of Traditional Listings: 432
- Monthly Traditional Rental Income: $3,503
- Traditional Cash on Cash Return: 2.60%
- Traditional Cap Rate: 2.63%
- Price to Rent Ratio: 20
- Walk Score: 51
The amazing weather and strong home values make Anaheim one of the most attractive cities in California for those who want to invest on the West Coast.
Anaheim is known to have some of the most affordable real estate in Orange County. Its pleasant community, beautiful environment, growing economy, and great work-life balance make it one of the best places to live in the country.
6. Pomona
- Median Property Price: $686,898
- Average Price per Square Foot: $454
- Days on Market: 61
- Number of Traditional Listings: 197
- Monthly Traditional Rental Income: $2,818
- Traditional Cash on Cash Return: 2.58%
- Traditional Cap Rate: 2.62%
- Price to Rent Ratio: 20
- Walk Score: 75
Pomona, a city located in LA County, is made up of four neighborhoods with fairly affordable homes. Its progressive culture, pleasant weather, and perpetually-growing economy make it a great place for individuals and families to move to.
7. Santa Clarita
- Median Property Price: $839,730
- Average Price per Square Foot: $448
- Days on Market: 54
- Number of Traditional Listings: 198
- Monthly Traditional Rental Income: $3,447
- Traditional Cash on Cash Return: 2.52%
- Traditional Cap Rate: 2.55%
- Price to Rent Ratio: 20
- Walk Score: 27
Santa Clarita is one of the best places to live in Southern California. It is an excellent place to start and raise a family, mainly because of its low crime rate and family-oriented festivities. It is also recognized as one of the country’s healthiest cities, making it all the more appealing to young professionals, retirees, and couples and families.
To start looking for and analyzing the best locations for traditional rental properties in California or any city and neighborhood of choice, click here.
7 Best Short Term Rental Markets in California
Short-term rentals have become one of the better (and cheaper) alternatives to hotels and resorts. Not only does it mean bigger savings for tourists and travelers, but you can also help meet the increasing demand for vacation rentals.
However, it is important to note that each county has a different set of regulations for short-term rentals. It would be wise for real estate investors like you to find out the existing rules before they start acquiring properties in CA.
Note that while some cities like Los Angeles and San Francisco are great places to invest in for Airbnb and other vacation home rentals, they may not be the best choices for out-of-state investors, given certain city and county rules and regulations about rental properties.
That being said, here are some of the best places to invest in real estate in California for those who are considering getting into the vacation rentals game:
1. Crescent City
- Median Property Price: $635,856
- Average Price per Square Foot: $323
- Days on Market: 44
- Number of Airbnb Listings: 136
- Monthly Short-Term Rental Income: $4,945
- Short-Term Rental Cash on Cash Return: 6.27%
- Short-Term Rental Cap Rate: 6.38%
- Short-Term Rental Daily Rate: $219
- Short-Term Rental Occupancy Rate: 65%
- Walk Score: 99
Crescent City is at the top of this list because of its robust tourism market. Much of its tourism comes from the Redwood National Park and its Pacific beaches. It is also home to several equally amazing attractions that bring people in droves every year. Real estate investors like you will not have a hard time recouping their investments in this California city.
2. Escondido
- Median Property Price: $949,660
- Average Price per Square Foot: $485
- Days on Market: 53
- Number of Airbnb Listings: 133
- Monthly Short-Term Rental Income: $8,214
- Short-Term Rental Cash on Cash Return: 6.00%
- Short-Term Rental Cap Rate: 6.06%
- Short-Term Rental Daily Rate: $336
- Short-Term Rental Occupancy Rate: 55%
- Walk Score: 42
Escondido is recognized as one of the county’s best vacation spots because of its proximity to San Diego and the coast. It probably explains why it draws in thousands of visitors each year. Tourists take advantage of the nearly perfect weather all year long to take part in numerous outdoor activities in the city.
3. Paramount
- Median Property Price: $652,868
- Average Price per Square Foot: $455
- Days on Market: 432
- Number of Airbnb Listings: 196
- Monthly Short-Term Rental Income: $5,230
- Short-Term Rental Cash on Cash Return: 5.45%
- Short-Term Rental Cap Rate: 5.52%
- Short-Term Rental Daily Rate: $190
- Short-Term Rental Occupancy Rate: 67%
- Walk Score: 89
Unlike the other cities on this list, Paramount in LA County offers tourists and visitors a small-town vibe with big-city amenities. Despite being just 12 miles away from Los Angeles, Paramount sits in all its stunning glory as a paradise on earth for those who want to get away from the big-city hustle-and-bustle.
4. Hawaiian Gardens
- Median Property Price: $825,780
- Average Price per Square Foot: $646
- Days on Market: 67
- Number of Airbnb Listings: 148
- Monthly Short-Term Rental Income: $5,404
- Short-Term Rental Cash on Cash Return: 5.43%
- Short-Term Rental Cap Rate: 5.50%
- Short-Term Rental Daily Rate: $179
- Short-Term Rental Occupancy Rate: 76%
- Walk Score: 90
Just a few miles away from downtown LA, Hawaiian Gardens gives tourists the best of two worlds as it offers all the conveniences of big city life and the charm of a suburban neighborhood. Its diverse population makes it an excellent place for gastronomic adventures.
On top of its beaches, Hawaiian Gardens also boasts numerous entertainment and amusement destinations, making it a staple in peoples’ lists of places to go to.
5. Huntington Park
- Median Property Price: $845,472
- Average Price per Square Foot: $510
- Days on Market: 81
- Number of Airbnb Listings: 462
- Monthly Short-Term Rental Income: $4,727
- Short-Term Rental Cash on Cash Return: 5.41%
- Short-Term Rental Cap Rate: 5.49%
- Short-Term Rental Daily Rate: $223
- Short-Term Rental Occupancy Rate: 51%
- Walk Score: 94
When it comes to the short-term rental market, Huntington Park is one of the places that are favorable for investors. It is a fun tourist destination filled with awesome attractions and fun things to do. The city’s healthy mix of sophistication and nature, paired with year-round warm weather, makes it a great place for a vacation rental property investment.
6. Riverside
- Median Property Price: $660,746
- Average Price per Square Foot: $386
- Days on Market: 61
- Number of Airbnb Listings: 205
- Monthly Short-Term Rental Income: $5,185
- Short-Term Rental Cash on Cash Return: 5.31%
- Short-Term Rental Cap Rate: 5.39%
- Short-Term Rental Daily Rate: $212
- Short-Term Rental Occupancy Rate: 60%
- Walk Score: 37
Just 60 miles east of LA, Riverside is one of the top vacation spots on this side of the Pacific. It is a haven for those who love arts, culture, food, sports, and beaches. Its assortment of fun activities and exciting attractions make it one of the best rental markets in California.
7. Anaheim
- Median Property Price: $856,771
- Average Price per Square Foot: $545
- Days on Market: 61
- Number of Airbnb Listings: 797
- Monthly Short-Term Rental Income: $6,457
- Short-Term Rental Cash on Cash Return: 5.17%
- Short-Term Rental Cap Rate: 5.23%
- Short-Term Rental Daily Rate: $303
- Short-Term Rental Occupancy Rate: 67%
- Walk Score: 51
Anaheim boasts one of California’s strongest tourism markets. After all, it is home to the Happiest Place on Earth as it is where Disneyland was born. A huge chunk of its tourism comes from its two Disney Parks, but it is also home to several equally amazing attractions that bring people in droves every year.
To start looking for and analyzing the best Airbnb locations in California or any city and neighborhood of choice, click here.
The Bottom Line
Real estate investing is no joke. It involves a huge amount of money that can be crippling without the right investment strategy. For it to work, you should be well informed of the current market conditions and fully prepared for unexpected occurrences.
Fortunately, technology has now made locating the best short term rental markets in California a lot easier. You now have a plethora of resources to make the wisest business decisions. Digital platform Mashvisor, in particular, specializes in analyzing data to help you determine a certain property’s profitability within minutes.
With tools like the Property Finder, Real Estate Heatmap, Investment Property Analytics, and even a Short-Term Rental Calculator, you can see whether a prospective property lines up with your goals or not. In addition, you also have access to local real estate agents to help further assist them.
Get access to our real estate investment tools to help you locate the best rental markets in California. Click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.