Where should you invest in the California real estate market? With so many of the best cities for real estate investment in the country in terms of profitability, strategy, and property types, it can be difficult to narrow down your choices to just one rental market. Today, we’re here to help you decide between two similar markets: the San Jose real estate market and the San Diego real estate market. We’ll compare the two markets using data from Mashvisor’s rental property calculator, highlight their effectiveness with traditional and Airbnb strategies, and list the best neighborhoods in each city for each investment strategy.
Related: California Is Emerging as the Best Place to Invest in Real Estate in the Coming Years
San Jose Real Estate
Median Property Price: $1,034,209
Traditional
Rental Income: $3,190
Cap Rate / Cash on Cash Return: 1.09%
Airbnb
Rental Income: $3,379
Cap Rate / Cash on Cash Return: 0.56%
The San Jose real estate market is well known for being one of the most lucrative and expensive rental markets in California and in the entire United States, as you can see based on the data from Mashvisor’s rental property calculator presented above. With the median San Jose investment property price teetering over a million dollars, it becomes clear why the market is costly but also money-making. Even though the average returns aren’t impressive, take a look at the high CoC return on investment properties in this housing market here. Both traditional and Airbnb investments generate high rental income and return on investment, though traditional investing comes out on top.
Best Neighborhoods in San Jose Real Estate: Traditional
The market conditions favor a traditional San Jose investment property for multiple reasons. For starters, the area contains the third largest community in the state, providing many prospective tenants. San Jose is also known as the “capital of Silicon Valley” as it is home to many tech giants, such as PayPal and eBay. Aside from its tech industry, San Jose contains a very mixed workforce of white and blue-collar jobs. The city’s unemployment rate is very low. With a 2.7% unemployment rate, San Jose’s rate is much better than the national unemployment rate of 3.9% and California’s unemployment rate of 4.3%.
The best neighborhoods in San Jose real estate for traditional properties are Edenvale – Seven Trees, East San Jose, and Fairgrounds.
1.) Edenvale – Seven Trees
Median Property Price: $720,139
Rental Income: $3,629
Cap Rate / Cash on Cash Return: 2.42%
2.) East San Jose
Median Property Price: $769,542
Rental Income: $3,081
Cap Rate / Cash on Cash Return: 1.99%
3.) Fairgrounds
Median Property Price: $733,219
Rental Income: $3,022
Cap Rate / Cash on Cash Return: 1.65%
Best Neighborhoods in San Jose Real Estate: Airbnb
Much like the rest of the San Francisco Bay Area, San Jose attracts many international and domestic tourists each year, with the most recent outing of 34 million tourists, all of whom visit the city for its culture, art, and sporting events. Legally, Airbnb San Jose does not have any turbulent issues or history. As a matter of fact, San Jose was one of the first cities to enforce Airbnb regulations. The most notable Airbnb regulations in San Jose are restrictions on the number of guests during a stay and a 180-day limit on renting an Airbnb rental without the host present.
The best neighborhoods in San Jose real estate for Airbnb are East San Jose, Willow Glen, and Blossom Valley.
1.) East San Jose
Median Property Price: $769,542
Rental Income: $3,057
Cap Rate / Cash on Cash Return: 1.55%
Occupancy Rate: 68.2%
2.) Willow Glen
Median Property Price: $1,527,131
Rental Income: $5,235
Cap Rate / Cash on Cash Return: 1.3%
Occupancy Rate: 73.27%
3.) Blossom Valley
Median Property Price: $845,156
Rental Income: $3,315
Cap Rate / Cash on Cash Return: 1.08%
Occupancy Rate: 54.6%
San Diego Real Estate
Median Property Price: $805,898
Traditional
Rental Income: $2,723
Cap Rate / Cash on Cash Return: 1.3%
Airbnb
Rental Income: $3,660
Cap Rate / Cash on Cash Return: 2.05%
The San Diego real estate market is among the most affordable and profitable markets in California. Not only is the average San Diego investment property cheaper than its San Jose real estate market counterpart, but it is, overall, more profitable. Real estate investors looking to invest in the San Diego real estate market will be in for great profit for both Airbnb and traditional investments.
Related: Why You Should Buy a San Diego Investment Property Now
Best Neighborhoods in San Diego Real Estate: Traditional
Unlike the case of San Jose real estate, the San Diego real estate market’s most profitable strategy is Airbnb investing, albeit traditional investing is still lucrative. San Diego real estate is home to the second largest community in California, offering a wide pool of tenants. The vast majority of San Diego’s workforce consists of white-collar jobs with a strong economy based on tourism, international trade, research, and defense. The city’s unemployment rate is 3.1%, which is much lower than the national average of 3.9% and California’s 4.3%.
The best neighborhoods in San Diego real estate are Gaslamp Quarter, Carmel Mountain, and Lake Murray.
1.) Gaslamp Quarter
Median Property Price: $634,518
Rental Income: $2,963
Cap Rate / Cash on Cash Return: 2.6%
2.) Carmel Mountain
Median Property Price: $681,108
Rental Income: $2,731
Cap Rate / Cash on Cash Return: 1.54%
3.) Lake Murray
Median Property Price: $568,391
Rental Income: $2,323
Cap Rate / Cash on Cash Return: 1.53%
Best Neighborhoods in San Diego Real Estate: Airbnb
Airbnb is the dominant rental strategy in San Diego real estate, largely due to its rental income and return on investment. The city is also a renowned tourism hub. San Diego is the 11th most visited city for international tourists and 5th most visited city for domestic tourists. The number of most recently visited tourists broke a record of 35 million, slightly surpassing San Jose’s record. While Airbnb San Jose is practically issue-free, the same cannot be said about Airbnb San Diego. The main issue with Airbnb San Diego is a new vote by the City Council to outlaw second home and vacation rentals for Airbnb. The only exception is the use of a unit within a multifamily property. The new Airbnb regulations will take effect in July 2019. Be sure to read more about San Diego’s Airbnb regulations before you begin to invest.
The best neighborhoods in San Diego real estate for Airbnb investing are Clairemont Mesa East, Del Mar Heights, and Pacific Beach.
1.) Clairemont Mesa East
Median Property Price: $468,056
Rental Income: $4,134
Cap Rate / Cash on Cash Return: 4.47%
Occupancy Rate: 72.5%
2.) Del Mar Heights
Median Property Price: $1,176,072
Rental Income: $5,260
Cap Rate / Cash on Cash Return: 3.24%
Occupancy Rate: 58%
3.) Pacific Beach
Median Property Price: $1,073,337
Rental Income: $5,643
Cap Rate / Cash on Cash Return: 3.11%
Occupancy Rate: 67%
San Jose Real Estate vs. San Diego Real Estate: Which Is the Better Investment?
The San Jose real estate market and the San Diego real estate market are two of the most successful rental markets in the California real estate market. Both markets provide a high return on investment and rental income for both strategies, both have booming economies, and both are tourism hotspots. Their main differences, however, are in Airbnb regulations and property prices. To start searching for an investment property in either of these cities, click here to start your 7-day free trial with Mashvisor, followed by 15% off for life.