Best Cities in California for Rental Property ROI

March 02, 2019

Which California Cities offer the Best Property Investment?

Looking for the best cities and communities to invest in properties in California in 2019? California offers the widest variety and 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 and restrictions in this regard.

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.

Our trade shows at the Los Angeles Income Property Management Expo! and Hawaii property management expo went very well. We have yet another trade show coming soon. Come on out and meet us in Denver on June 28th! We’re looking forward to answering your questions and discussing the latest trends in managing income properties.

But for now, keep your mind open and explore each California city and community. Keep up on property management trends

We’ve got some helpful lists below of communities and cities which are highly ranked by the experts.

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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.

Find The Right Communities in Growth Areas

To find the best properties, whether it’s California, Florida, South Carolina, or Texas, not only will you have to assess each city for opportunities, you’ll have to outcompete a growing army of property investors. Check out the US multifamily housing market along with the best multifamily markets across the country.

What are Rental Property Investors/Management Firms Doing?

Much of the growth of investment in this 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

Is Growing Your Portfolio the Prime Objective?

The multifamily market in particular allows big increases in properties which can allow some investors and property managers to move up to 50 to 100 property portfolios. Growing your portfolio is key to building and sustaining a successful property management business.

But Should California be Your First Choice?

California is one that always draws keen interest. 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 situation for investors and property management companies.

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 2019:

Dos Palos
Adelanto
Calimesa
Firebaugh
San Pablo
Lathrop
Los Banos
Arvin
Lake Elsinore
Perris

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

Seal Beach, Los Angeles
Gold River, Sacramento
Winchester, Los Angeles
Homeland, Los Angeles
Folsom, CA
Camino Tassajara, San Francisco
Val Verde, Los Angeles
Lexington Hills, San Francisco
Calimesa, Los Angeles
Valle Vista, Los Angeles
El Dorado Hills, Sacramento
Palo Alto, Bay Area
Los Altos Hills, San Francisco
Orinda, San Francisco
Rocklin, Sacramento
Cherry Valley, Los Angeles
Mentone, Los Angeles
La Riviera, Sacramento
Vineyard, Sacramento
West Menlo Park, San Francisco
Sleepy Hollow, San Francisco
Rosemont, Sacramento
Mountainview, Bay Area
Lafayette, San Francisco
Piedmont, San Francisco

Low Risk High Return

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.

What’s not discussed is how much prices in other states would fall if an economic fallout occurred. Investors fleeing the stock markets are looking to recession proof their wealth, but are these current high yield cities going to sustain? Long term might favor California.

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.

If you’re ready to invest outside of California in the array of cities enjoying good economic growth, we’ll cover those in our next post. After all, 14% yield is worth a closer look.

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