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Best Cities in California for Rental Property ROI

January 02, 2021

Best Cities in California to Buy Rental Investment Property?

Looking for an investment condo or house to rent in the Golden State?  A lot of people still are.

What has changed today in 2021, as we await the vaccinations and economic recovery?  Rental returns in California cities have been brutal, near the lowest in the nation according to recent ATTOM data.  The best cities, are ex-California.  A lot of people have moved out of their apartment to roomier places outside of metros or even out of state.

Young people have abandoned their student housing and apartments and moved back in with their parents.  Of course, the reverse is coming later this year.  With vaccinations, college students will likely be back to formal classes next fall.

So with the worst out of the way by April, we will see renewed interest California rental property. And rents could begin to rise in the 2nd half.

Covid 19 Will Pass

When Covid 19 finally passes and the business reopening begins, jobs will be more plentiful.  For some cities, there will be lingering effects, however. You have to believe California’s tech sector will recover and Silicon Valley will regenerate its local housing market.

Prices Plateauing for Now

Despite the outward migration in 2020, higher taxes, business shutdowns, government funding setbacks, California will regain its luster as one of the top housing markets in 2021.  At least with its shortage of available housing, housing prices will be on the rise and post Covid 19, those Silicon Valley apartments will start to fill up again.

And as rent prices rise, this is an unusual opportunity for investors to find towns and cities to capitalize on the demographic trends that will evolve in 2021.

 

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More than Just ROI

Below is a revised, updated list of best California communities and cities to buy rental income property.

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 state’s resilience. Google, Oracle, Wells Fargo, Apple, Intel, Synnex, and many more of the biggest US corporations are located here.

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

California Housing Outlook

As you can read in the California housing predictions, 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 AngelesSan 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 were rising faster than wages in 84% of cities in the US.   That price trend combined with a shortage of housing in the suburban areas and small towns across the state creates a solid investment scenario for investors as well as property management companies.

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

CityAnnual Gross Rental Yield Predicted
San Francisco Oakland4.1%
Santa Clara3.6%
Los Angeles4.9%
San Diego5.5%
Sacramento6.0%
Riverside5.6%
San Bernardino7.1%
Santa Barbara6.6%
Ventura5.0%
Solano6.1%

Top Ten from Home Snacks

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

  1. Buellton
  2. Williams
  3. Big Bear Lake
  4. Dos Palos
  5. Calistoga
  6. Indian Wells
  7. La Habra Heights
  8. Woodside
  9. Solvang
  10. Gustine

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

  1. Lincoln Village, Los Angeles
  2. Green Acres, Sacramento
  3. Seal Beach, Los Angeles
  4. Winchester, Riverside
  5. Homeland, Riverside
  6. Woodbridge, CA
  7. Salida, California
  8. Sky Valley, California
  9. Calimesa, California
  10. Folsom, California
  11. Camino Tassajara, Oakland
  12. Val Verde, Los Angeles
  13. Kingsburg, California
  14. Mountain House, California
  15. Lexington Hills, San Jose
  16. Sunnyside, California
  17. Mentone, Los Angeles
  18. Desert Edge, California
  19. Calimesa, San Bernardino
  20. Valle Vista, Riverside
  21. El Dorado Hills, Sacramento
  22. Palo Alto, Bay Area
  23. Los Altos, San Jose
  24. Taft, California
  25. Clovis, California

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 is a lot less.

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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See also:  Best Cities for Rental Property | Best Type of Property to BuyRent an Apartment | Rental Listings |  California Property Management CompaniesOnline Rent Payment | How to Increase Rental ReturnsProperty Management Trends  | Denver Housing MarketProperty Management Analytics | California Housing Predictions 2021 |   San Francisco Apartment Prices | New York Apartment Prices | Los Angeles Apartment Prices | Property Rental Management Software | Apartments for Rent | Renters Insurance | 2021 Rental Housing Market | Apartment Rental Prices  | Property Management CompanyStart a Property Management Company | Cloud Based Property Software

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