Buying Investment Property in California: Top 5 Cities to Consider

Have you ever thought about investing in the real estate market? As a rental property owner, you’ll earn consistent passive income and open up a world of opportunities to create the life you want. You’ll also gain annual tax breaks, a diversified portfolio, property appreciation over time, and capital gains. While there are numerous benefits to purchasing real estate, it’s difficult to know how to find a property that promises high earning potential. 

The first step to finding a profitable investment property is deciding where you’ll purchase real estate—this is perhaps the most important step of all. The location of your rental properties could be the determining factor in being successful as an investor. In this article, we’re going to share why you need to consider buying investment property in the West Coast state of California. We’ll also share 5 of the best cities in California to buy investment property!

Why Invest in California’s Real Estate?

You may be asking, “What makes California the ideal location for purchasing rentals?” Here are 5 reasons why California is the perfect place to buy investment property:

  1. Heightened Demand
    With warm weather year-round, hundreds of beaches to choose from, endless employment opportunities, and a variety of recreational activities, California is a top consideration for residents looking to settle down. California currently ranks as the most populated state in the country with over 38 million inhabitants and counting. You may have heard of the “California Exodus” which is a reference to the current mass emigration from California to other states in the US. However, recent studies show California’s population decline is only in specific regions, with most SoCal counties experiencing constant growth. As the state’s population increases so does the demand for housing! That means landlords won’t run out of potential renters in this West Coast state anytime soon (or most likely ever).
  2. Limited Supply
    For years, California has faced a housing shortage caused by density restrictions (e.g. single-family zoning) and high construction costs. While this may come across as an obstacle, the state’s housing shortage is a pro for landlords. The scarcity of housing allows real estate investors to increase rent and improve property value. With numerous families and individuals searching for housing around California, now is the time to advertise your property as their new home. Don’t let this chance pass you by!
  3. High Percentage of Renters and Increased Rental Prices
    California ranks second for the highest percentage of renters nationwide. With 44.7% of this state’s population residing in rental properties, what better place to choose for your next real estate investment? The constant flow of renters in California results in you building a secure source of passive income for years to come. Not only has California earned a place on the list for most renters in the US, but landlords also continue to charge higher rent prices every year. For example, Southern California cities such as Bakersfield, Santa Maria, and Riverside have seen up to 40% rent increase since COVID-19. The rising rent prices and number of tenants looking for a rental in California prove that this state is a goldmine for landlords.
  4. Low Property Taxes
    It’s no surprise that California’s real estate market is perhaps the most expensive in the nation. Nevertheless, it also boasts some of the lowest property taxes in the average year. Proposition 13 is a California law that limits general tax properties to only 1% of the total market value of a property, and it caps taxes at a 2% increase every year. These low property taxes ensure landlords will experience a positive return when buying investment property in California. Whether you’re an experienced landlord or a brand-new investor, you’ll want to take advantage of California’s controlled property taxes before it’s too late.

5 Best Cities in California To Buy Investment Property

Now that you know why California’s real estate is worth your investment, let’s take a look at which cities you need to buy property in. Here are 5 of the best cities in California to buy investment property:

  1. Riverside, CA
    Riverside is quickly becoming one of SoCal’s top cities to buy investment property. What makes this community special? With a 37.5% increase in rent prices since 2020, Riverside’s housing market is the prime spot for landlords to experience financial freedom. Rentals are valued at an average monthly cost of $2,162, making Riverside’s real estate prices exponentially higher than the state’s median rent costs. The Historic Mission Inn; University of California, Riverside (UCR); and the community’s involvement in the naval orange industry are just a few things that set Riverside apart. With all this city has to offer, it’s no surprise that Riverside’s population is steadily growing year after year ensuring that landlords won’t find a shortage of potential tenants anytime soon.
  2. Redlands, CA
    If you want to buy investment property in California, look no further than the suburban city of Redlands, CA. With a cash-on-cash return of 2.77%, Redlands has one of the highest long-term rental payoff rates in the state. When choosing where to purchase a rental property, it’s vital to pick a location that will make you more money than your initial investment. Redlands’ housing market promises not only massive rewards but also consistent demand for high-quality rentals. This city’s tight-knit community, trusted educational institutions, and outdoor parks make Redlands an attractive place to settle down. Purchase the best of Redland’s investment properties and take advantage of the city’s small-town charm that draws in new residents year-round!
  3. Big Bear Lake, CA
    Sitting at approximately 6,750 feet above sea level is the mountainous destination of Big Bear Lake, CA. Cozy cabins, quaint bungalows, and unique homes surrounded by pine trees make Big Bear Lake contain some of the best investment properties in California. Although Big Bear has a humble population, this small town is buzzing with visitors year-round making the demand for vacation rentals extremely high! With a median home cost of $559,000, which is a great deal lower than California’s average sale price, Big Bear Lake boasts growth potential in terms of constant passive income and property appreciation. Keep in mind that this city requires specific licenses if you’d like to invest in short-term rentals. It’s common to have more hoops to jump through in vacation spots such as Big Bear, but don’t let it stop you from becoming a wealthy investor in this breathtaking community!
  4. San Diego, CA
    With San Diego’s home prices rising at one of the fastest rates in the country, this coastal city’s housing market promises property appreciation for investors for many years to come. Top employers such as Sharp HealthCare; University of California, San Diego; and Sempra Energy attract new residents every year increasing the demand for high-end housing in San Diego, CA. Over half of San Diego’s population rents at an average monthly price of $2,997, which opens the door for landlords to generate massive amounts of wealth. It’s important to note that San Diego is a competitive market with numerous investors trying to buy property in this city, but with the experience of professionals you can become a financially independent investor within months.
  5. Huntington Beach, CA
    Located in Orange County is the surfer’s city of Huntington Beach, CA. Thanks to the sunny climate, world-renowned beaches, and top-rated education systems, Huntington Beach’s population is continually expanding. Properties are rented at an average price of $2,687 making this city’s real estate a top contender for landlords who’d like to earn positive cash flow and diversify their portfolios. Huntington Beach holds some of the best investment properties in Southern California with beachside single-family homes, compact studio apartments, and spacious multi-family properties. Don’t wait to jump on this opportunity and become the next thriving real estate investor in Huntington Beach!

Hire a Property Manager to Handle Your Investments Year Round

Now that you know where to buy investment properties in California, it’s time to hire a property management company. With the help of property managers, you won’t have to advertise your rentals, deal with tenant conflicts, conduct monthly property inspections, or organize accounting records—TrueDoor Property Management can do all of that for you! Our local team in Southern California knows the housing market like no one else. For 40 years, we’ve helped countless real estate investors manage apartments, condos, and single-family homes. We pride ourselves in simple property management services that take the pressure off of property owners. The result is effortless wealth generation!

Do you want to join the list of TrueDoor’s satisfied clients? We’re known for our professionalism, reliable communication, and people-first mentality. Whether you need help filling your rental within 30 days or need TrueDoor’s team to handle legal issues, we’ve got you covered. Contact us today and let us take charge of your rental while you create the life you’ve always wanted.