“Home prices are holding up relatively well, despite rising interest rates and falling housing demand in recent months, says Jordan Levine, vice president and chief economist with the California Association of Realtors (CAR<\/a>). \u201cTight housing inventory was a primary factor preventing prices from free falling as new active listings continued to dip to reach the lowest level in at least the past five years.”<\/p>\n What does this market environment mean for California investors? And how can investors maximize their potential earnings within the Golden State?<\/p>\n In order to get to the heart of the real estate market in California, we spoke with Louise Juracek<\/a>, a top real estate agent in Bakersfield, California<\/a>. As an investor herself with 40 years of industry experience, Juracek provides a unique perspective both on what qualifies as a hot investment market and a good investment property<\/a> in California.<\/p>\n\n\n\n\n\n Interested in investing in real estate in California? A top real estate agent can help. HomeLight analyzes millions of transactions and thousands of reviews to find you the right agent for your needs \u2014 in just under two minutes.<\/p>\n \n Before we dive into specific California investment markets, it\u2019s worth noting a few things that optimize an area for investment in general. As you\u2019re looking into investment locations, keep the following factors in mind.<\/p>\n A great property at a great price is nothing if it\u2019s not in a great area. Savvy investors spend time researching the location of the property, paying special attention to features that would make it desirable to renters or buyers.<\/p>\n With unique entertainment, beautiful national parks, and 3,427 miles of coastline<\/a>, California is estimated to have received more than 259 million tourists in 2022<\/a>. That\u2019s great news for the short-term rental market! Those same features \u2013 beaches, trails, entertainment \u2013 increase the quality of life for residents as well. That\u2019s great news for the long-term rental and fix-and-flip<\/a> markets.<\/p>\n Juracek notes that California as a whole has proven to be very desirable, as property values continue to increase. \u201cAppreciation is a huge advantage of purchasing in a market like California.\u201d<\/p>\n As you\u2019re researching a local market within the state, consider what makes that area particularly attractive. Is there something \u2013\u2013 such as a university, industry, or natural feature \u2013\u2013 that will continue to draw tourists, renters, or buyers to that area?<\/p>\n According to a recent Ibis economic analysis<\/a>, California\u2019s economy looks promising, despite post-COVID difficulties:<\/p>\n \u201cCalifornia’s gross state product (GSP) in 2022 reached $2.9 trillion, with growth of 2.9% over the five years to 2022. Businesses in California employed a total of 21,155,273 people in 2022, with average annual employment growth over the past five years of 0.7%. The top three sectors by total employment are Information, Manufacturing, Real Estate and Rental and Leasing, while the unemployment rate across the state in 2022 was 4.3%.\u201d<\/p>\n A growing economy usually indicates a stable, appreciating real estate market. At a local level, investors should take note of large businesses with a solid track record in the area, as well as any new businesses intending to move into the location. Both are great indicators of consistent residential needs.<\/p>\n Population growth is good for investors because it means the area will continue to demonstrate a strong demand for housing.<\/p>\n California is the most populous state in the nation, with 39.24 million residents<\/a>. While California as a whole may have seen a slight decrease in population in the last few years, certain areas have continued to grow, as we\u2019ll note below. Statewide, experts project the population to exceed 45 million by 2050<\/a>.<\/p>\n Of course, investors will want to dial that number in closer to their intended city or county. To research historical and projected population growth in any given area, consider searching U.S. Census data<\/a> as well as this county-by-county data<\/a>.<\/p>\n Since cash flow is directly related to rental income, investors should always look into an area\u2019s average rental rates. Investors can expect the following rental rates, on average<\/a> in California:<\/p>\n However, within the state, rental rates vary significantly by location. The average rent for a 1-bedroom residence in Santa Barbara County is $2,015<\/a>, while in Glenn County, it\u2019s $703<\/a>. Even within the same county, factors such as waterfront access and community amenities create variable rent prices that investors will need to look into by neighborhood, specifically.<\/p>\n In addition to data, investors should also choose an area for how it can generally help advance their personal goals. For example, some investors have no interest in management and maintenance; they may therefore want to choose an area based more on long-term appreciation than on cash flow. Other investors prefer a hands-on approach to real estate; they would thus want to choose property that\u2019s within driving distance of their permanent residence.<\/p>\n Juracek personally recommends that new investors \u201ccut their teeth\u201d on single-family homes rather than condos or multi-family properties. \u201cIt’s easier to get out of a single-family property than it is to get out of a multi-family property. The resale pool is bigger.\u201d<\/p>\n With those factors in mind, let\u2019s check out some of California\u2019s top individual markets. We\u2019ll take a look at some desirable local factors, as well as median home prices<\/a> with data from Realtor.com, average rental rates<\/a> from RentData.org (2 bedroom data), and population size<\/a> data from California Demographics.<\/p>\n As the biggest city in California, Los Angeles is naturally one of the hottest real estate markets. Even though Los Angeles home prices are high, investors continue to snatch up LA properties at a rate of 20% of all purchases<\/a>. The west coast\u2019s entertainment and media hotspot, Los Angeles, continues to see marked population growth, with a .23% increase<\/a> year-over-year. For those deterred by the median price of metro LA property, consider close suburban markets like Hawthorne, where 72.5% of residents rent<\/a> their living arrangements.<\/p>\n Juracek cautions investors to research city-wide rental ordinances before jumping into rental holdings. Local landlord-tenant laws may favor a fix-and-flip strategy over a buy-and-hold strategy in Los Angeles.<\/p>\n Median home price:<\/b> $999,000 If you\u2019re looking for rental flexibility and great appreciation gains, a home in Anaheim could be a great fit for your investment portfolio. Thanks to Disneyland and Knott\u2019s Berry Farm, Anaheim investors have the ability to choose whether long-term or short-term rentals suit them best. A tourism economy keeps the demand for both sectors strong within the community. In addition, Anaheim has seen an incredible 41.4% appreciation rate<\/a> over the past three years, well above the national average of 28.8%.<\/p>\n Median home price:<\/b> $800,000 California\u2019s capital city of Sacramento has become known as a hip \u201cfarm-to-table\u201d type of community. A median age of 34.5 shows that the city is drawing young professionals who will likely continue to drive demand for housing. Demographic experts predict that Sacramento will grow 54% by 2060<\/a>. For investors who prefer a more small-town atmosphere, take a look at nearby Elk Grove, where vacation homes have the potential to bring in over $2,000 per week, and occupancy rates sit around 82%<\/a>.<\/p>\n Median home price:<\/b> $475,000 Check out that price point! Buying property in Fresno is a bargain when compared to some other California cities. Fresno is home to a thriving agricultural industry, an economy that relies in part on seasonal and temporary labor \u2013\u2013 the perfect demographic for rental demand. With an average annual appreciation rate of 9% and a 26% increase in rental rates<\/a> in the past year, this real estate market is a diamond deal for investors.<\/p>\n Median home price:<\/b> $389,000 Juracek recommends her local Bakersfield market for real estate investors. \u201cIt\u2019s pretty affordable here for a landlord to purchase. We’re starting to see investors coming back into the real estate market even more strongly than they were, and that is because they can make a better profit here than they can in the stock market right now.\u201d<\/p>\n Unlike some California cities, Bakersfield has seen steady population growth<\/a> over the years, and the area has been attracting new businesses, like Amazon, which provide new jobs. Both of those factors make for a great real estate investment market.<\/p>\n Median home price:<\/b> $384,500 There\u2019s no getting around it \u2013\u2013 home prices are high in the lovely city of San Francisco. But a greater initial investment does yield better cash flow since rental rates are above average. Plus, the San Francisco economy<\/a> sits at the sixth largest in the nation, hourly wages are $10 higher than the national average, and unemployment is a full percentage point lower than the rest of the country. The city\u2019s population has grown by .15%<\/a> year-over-year, which would naturally indicate an increased demand for housing. All in all, if you can get past the sticker shock, San Francisco is a great place to invest in real estate.<\/p>\n Median home price:<\/b> $1,300,000 For those who want to capitalize on the economy of San Francisco without the high price point, Oakland is a great place to consider. In Oakland, you can easily invest less than a million dollars, though, in turn, you\u2019ll have to accept less in rent as well. Not only is Oakland a hotspot for commuters into San Francisco, it also stands on its own as a city full of culture and entertainment. With parks, museums, theaters, and even a zoo<\/a>, Oakland is an ideal place for families who need to be close to the Golden Gate City.<\/p>\n Median home price:<\/b> $795,000 The luxe desert town of Palm Springs has long been a top vacation choice for the rich and famous, hosting the likes of Frank Sinatra and Elvis Presley<\/a> at times. Today, the allure of Palm Springs remains, for both vacationers and remote workers alike. Vacation rentals bring in an average of $395 per night with a 61% occupancy rate<\/a> throughout the year. Palm Springs is well-suited to buy-and-hold strategies, as appreciation rates run 7.9% annually<\/a>. With a high saturation of desirable mid-century modern architecture, Palm Springs is a unique place to invest for the long term.<\/p>\n Median home price:<\/b> $850,000 No matter what local market you choose, keep the following tips in mind as you pursue your California real estate investment property<\/a>.<\/p>\n Whether you\u2019re investing locally or from another state, you\u2019ll want to work with an agent who specializes in investment properties.<\/p>\n Juracek says, \u201cYou want to choose a professional who knows about investing in property. They\u2019ll have a basic idea of the tax consequences and tax benefits of having a property as an investment.\u201d<\/p>\n Having an investment-focused agent on your team will be a great resource in understanding the market on a micro level, including capitalization rates, cash flows, neighborhood norms, and more. HomeLight<\/a> can connect you with that perfect agent partner.<\/p>\n Juracek confirms the general knowledge about California rental laws. \u201cIt\u2019s really kind of anti-landlord. If you’ve got tenants not paying rent or not living up to their lease, it’s not easy to secure an eviction.\u201d She also mentions statewide rent control, which caps rental increases at the rate of inflation.<\/p>\n Landlord laws vary on the local level, so you\u2019ll need to research the requirements up front. Juracek notes that her local Kern County laws aren\u2019t as stringent as a place like Los Angeles County. Your agent can be a great resource in this aspect.<\/p>\n As you\u2019re evaluating investment properties, be sure to set a budget that includes things that are not reflected in the list price. Closing costs<\/a>, property repairs, tenant placement costs, and ongoing maintenance<\/a> are all significant expenses.<\/p>\n Juracek reminds clients that it\u2019s important for income properties to actually make income. \u201cI never advise negative cash flow,\u201d she says, after living through historical investment strategies which favored losses for tax write-offs. She adds, \u201cHave enough money to purchase the property [for cash], or if you need a loan, remember most lenders require at least 20 percent down.\u201d<\/p>\n![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\"){kind=logo}
\n <\/div>\n \n A Top Agent Can Be Your California Real Estate Investment MVP<\/h3>\n
Factors of a great real estate market in California<\/h2>\n
A desirable area<\/h3>\n
A growing economy or job market<\/h3>\n
Consistent population growth<\/h3>\n
Nice average rental rates<\/h3>\n
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Aligns with personal portfolio goals<\/h3>\n
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<\/p>\nBest cities in California to invest in real estate<\/h2>\n
Los Angeles<\/h3>\n
\nAverage rental rate:<\/b> $2,222
\nPopulation size:<\/b> 3,849,297<\/p>\nAnaheim<\/h3>\n
\nAverage rental rate:<\/b> $2,539
\nPopulation size:<\/b> 345,940<\/p>\nSacramento<\/h3>\n
\nAverage rental rate:<\/b> $1,756
\nPopulation size:<\/b> 525,041<\/p>\nFresno<\/h3>\n
\nAverage rental rate:<\/b> $1,258
\nPopulation size:<\/b> 544,510<\/p>\nBakersfield<\/h3>\n
\nAverage rental rate:<\/b> $1,137
\nPopulation size:<\/b> 407,615<\/p>\nSan Francisco<\/h3>\n
\nAverage rental rate:<\/b> $3,188
\nPopulation size:<\/b> 815,201<\/p>\nOakland<\/h3>\n
\nAverage rental rate:<\/b> $2,405
\nPopulation size:<\/b> 433,823<\/p>\nPalm Springs<\/h3>\n
\nAverage rental rate:<\/b> $1,751
\nPopulation size:<\/b> 45,019<\/p>\n\n
You want to choose a professional [agent] who knows about investing in property. They’ll have a basic idea of the tax consequences and tax benefits of having a property as an investment.<\/q>\n
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![\"Louise](\"https:\/\/media.homelight.com\/uploads\/agent\/picture\/986831\/normal_Profile_20Pic.jpeg\")
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Tips for finding a great investment property in California<\/h2>\n
Partner with an expert real estate agent<\/h3>\n
Understand local landlord\/tenant laws<\/h3>\n
Run a realistic budget<\/h3>\n
Be ready to make an offer quickly<\/h3>\n