Best Cities in California for Rental Property ROI

January 02, 2020

Which are the best California Cities for Investment Property?

Looking for an investment condo in the Golden State. A lot of property investors still are. California will be one of the top housing markets in 2020. Another year has passed and new communities are drawing the attention of buyers.

But after you see the high prices, high taxes, landlord restrictions, employment in different California cities, and the price to rent ratios, you’ll be wondering which cities offer the best rental properties in 2020.

California offers the widest variety of properties and perhaps the highest potential rental returns. However, the best property really depends on whether you’re looking to live in your investment, fix and flip, or use it as a long term rental or short term Airbnb type rental property.

Each community in California offers unique possibilities, dangers, and restrictions in this regard.

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Price, lifestyle, amenities, price to rent ratio, taxes, commute distances, pollution, and growth all play into the buy decision. With a little research and a spreadsheet, you’re ready to narrow down your choices to the best California communities.

But for now, keep your mind open and explore each California city and community. We’ve got some helpful lists below of communities and cities below ranked by the experts.

These are communities offering the best neighborhood character, schools, safety, jobs, and other key factors for homeowners, investors as well as renters. Check out the rental property report for more info on US rental housing. and best cities to buy rental property. Surprisingly, the experts pick Northern California cities as more desirable.

What are Rental Property Investors/Management Firms Doing?

Much of the growth of investment in the rental income property sector is from those smaller investors and firms owning 3 to 100 properties — what we might call SMB property investors. Why are they doing it? Because they can.

New efficiencies in acquisition, financing, and property management are fueling a strong growth in property portfolios of 3 to 10 rentals and from 11 to 100 rental properties.

Screen Capture courtesy of Attomdata.com

But Should California be Your First Choice?

California is one state that always draws keen interest for rental properties. Maybe it’s the beaches and ocean views or maybe it’s the perfect weather, or it’s just the economy and employment situation. Google, Oracle, Wells Fargo, Apple, Intel, Synnex, and many more of the biggest US corporations are located here.

And if you’re a Californian, you may prefer to keep your money within the state, in properties accessible for a yearly visit, and in a familiar regulatory environment. Better the devil you know. Other cities across the US seeing high rises in rent might be hit soon with rent controls and high tax rises.

Google’s Headquarters in Mountainview, California. Photo courtesy of wikipedia commons.

California Housing Report 2019

As you can read in the California housing predictions for 2019, construction was on the upswing with new developments in Los Angeles, San Francisco and San Diego. Lately, it’s flat which is helping raise resale prices.

See the Los Angeles, San Francisco and San Diego, and Oakland housing reports for apartment rental demand.

The prices in California’s major cities makes them a tougher place to buy and rent out profitably. Yet some urban neighborhoods could have possibilities. See the lists below of the best neighborhoods in Los Angeles and the Bay Area.

Attom Data’s Q1 2018 Property Rental Report found that rents are rising faster than wages in 84% of cities in the US. Tough for renters but a solid demand scenario for investors and property management companies.

Here’s a look at the rental yields in major California metros:

City	Annual Gross Rental Yield Predicted
San Francisco Oakland	4.1%
Santa Clara	3.6%
Los Angeles	4.9%
San Diego	5.5%
Sacramento	6.0%
Riverside	5.6%
San Bernardino	7.1%
Santa Barbara	6.6%
Ventura	5.0%
Solano	6.1%

Top Ten from Home Snacks

Here’s Home Snack’s Top Ten look at the best communities to buy in California for 2020:

Buellton
Williams
Big Bear Lake
Dos Palos
Calistoga
Indian Wells
La Habra Heights
Woodside
Solvang
Gustine

Niche.com Chimes in with Their Top 25 Best Communities to Buy.

Lincoln Village, Los Angeles
Green acres, Sacramento
Seal Beach, Los Angeles
Winchester, Riverside
Homeland, Riverside
Woodbridge, CA
Salida, California
Sky Valley, California
Calimesa, California
Folsom, California
Camino Tassajara, Oakland
Val Verde, Los Angeles
Kingsburg, California
Mountain House, California
Lexington Hills, San Jose
Sunnyside, California
Mentone, Los Angeles
Desert Edge, California
Calimesa, San Bernardino
Valle Vista, Riverside
El Dorado Hills, Sacramento
Palo Alto, Bay Area
Los Altos, San Jose
Taft, California
Clovis, California

Take another look at the price to rent ratio to help your decision to invest in these cities.

Low Risk High Return

Across the US, the question then, might be whether you trust the growth and sustainability of the economies of those cities in the south, desert states, and the midwest?

Capital appreciation and rent growth in cities such as Charlotte, Tampa, Atlanta, Greensboro, Orem, Columbia, Augusta, Jacksonville, Springfield and others look very inviting with an annual gross rental yield of 11% to 14%. The best you might do in California’s housing market in 2019 might be 8%.

Yet, if the US economy should falter, will California’s cities will retain and regain their value and rent performance fastest? That’s the long term view.

You can see a fuller list of the best California cities here and in the California housing market report. Take a closer look at the Los Angeles housing market and the San Francisco housing market.

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