Best Places to Buy Rental Property in California

The pandemic had an extraordinary and unexpected impact on the California real estate market. Over the past few years, real estate prices skyrocketed, and the sales of vacation homes in the U.S. rose by 44%. With the ability to pay for themselves, generate additional income, and have a customized vacation home for family and friends, second homes are a savvy investment—but it’s all about narrowing down the right market for the best ROI. 

Rental data experts, AirDNA, compare investing in short-term investment properties to a game. “Investing in Airbnbs is a lot like playing Monopoly,” they said. “Winning the game is all about owning the right properties on the right streets to maximize how often (and how much) other players pay you.”

Why Is California Real Estate So Popular for Investors? 

Certain cities in California, like Los Angeles and the San Francisco Bay area, boast home prices far above the national average compared to other real estate markets.

However, California cities continue to allure investors due to the high demand, property value, higher rent prices, and lucrative rental income. California has a booming economy, competitive job market, stunning geographical diversity, a high population, and a year-round flow of domestic and international tourists. Needless to say, it’s an attractive destination for both traditional rental properties and short-term vacation rentals!

The California housing market is highly competitive, but if you research, choose the right location, buy the right investment property, and partner with a knowledgeable property management company—the sky’s the limit!

The Best Rental Markets in California in 2022 

Los Angeles

Median Market Price: $860,230 (+ 8.1% YoY)

The urban hub of Los Angeles is a prime destination for investors and one of the top markets in the United States for investment properties. L.A. has the diversity of a thriving metro area with a dozen major industries, the glamor of Hollywood entertainment, world-famous family attractions, and quick access to miles of beautiful beaches, like Huntington Beach and Newport Beach, on the Pacific Coast Highway. 

Like most major cities, there is a wide range of options for traditional rentals and short-term rentals in L.A. From downtown lofts and historic hilltop homes to oceanfront luxury retreats and mid-century mansions—the investment options are endless. Since the median property price in L.A. is higher than in many other cities across the United States, the initial investment may be more significant. However, the cash-on-cash return you can expect is worth the cost!

San Diego

Median Market Price $929,000 (+16.9% YoY)

A scenic drive south on Pacific Coast Highway takes you to San Diego, one of the nation’s hottest rental property markets. Ranked as one of the top United States travel destinations, San Diego welcomed 24 million visitors in 2021 and is bouncing back fast to pre-pandemic visitor numbers. This hot rental market is all about sun and fun, with beach markets up 10% over 2021 and dominating online search engines. Investors can expect a solid rental income return investing in a piece of “America’s Finest City.” 

The most popular neighborhoods for the best return on investment (though with some of the highest median home prices in the country) are the coastal towns of La Jolla, Pacific Beach, Mission Bay, Ocean Beach, and Imperial Beach. To regulate vacation rentals, the City of San Diego recently passed the Short-Term Residential Occupancy (STRO) to manage the occupancy rate of your rental. Consulting with a knowledgeable vacation rental professional before investing is always a savvy start.   

Palm Springs

Median Market Price: $836,500 (+34.9% YoY)

California is not all about the beach! Located an easy driving distance from L.A., Palm Springs is one of the most beautiful and luxurious desert destinations around the globe! Since 2020, property prices in the Coachella Valley have increased by 56%. However, the median property price is still traditionally low in California. Palm Springs is a prime market for buying a short-term rental in California. 

Palm Springs attracts over 14 million visitors annually throughout all four sunny seasons, and it’s about the lifestyle! Visitors are welcomed with chic, high-end boutique shops, restaurants, bars, desert landscapes dotted with lush fairways, hiking trails, natural hot springs, and classic mid-century architecture backdropped by the San Jacinto Mountains. 

Before buying a short-term rental in Palm Springs, it’s vital to understand the regulations, restrictions, and occupancy rate rules specific to the rental market. Although short-term rentals are allowed in Palm Springs, the city has some of the strictest regulations in the country. Make sure to complete rental market research before purchasing a short-term vacation rental to ensure it’s the right investment for you.

Big Bear Lake, California

Median Market Price: $699,000 (+16.5% YoY)

Nestled in the San Bernardino National Forest, less than 100 miles from L.A., Big Bear Lake is one of California’s top lake destinations with four seasons of adventure. Big Bear Lake is more affordable than Lake Tahoe in real estate (and ski passes!) and an excellent investment for buyers scouting for a lakefront home near the ski slopes. 

Since the pandemic, Big Bear has seen a boom in visitors and real estate investors. The real estate market has been up 16.5% since July 2021 and isn’t showing any signs of slowing down. The median property price is slowly ticking up year after year too. Located just a leisurely road trip from L.A., Phoenix, and Las Vegas, Big Bear attracts visitors year-round with a charming village, hundreds of miles of hiking and biking trails, 22 miles of shoreline, and Big Bear Mountain Resort on their doorstep.

Twentynine Palms

Median Market Price: $310,000 (+27% YoY)

Twentynine Palms is an emerging desert destination in the Greater Palm Springs area located at the southern edge of the Mojave Desert at the entrance to Joshua Tree National Park. Joshua Tree National Park is the closest national park to San Diego and Los Angeles and set new records in 2021 with over three million visitors, most choosing to stay in or near the towns of Joshua Tree and Twentynine Palms.

Many investors are scouting out this popular destination for the price-to-rent ratio. It’s cheaper to purchase properties here than in other destinations in California, yet the rental income and cash return are still reliable and promising!

Twentynine Palms is the closest town to the quieter north entrance to Joshua Tree National Park and is growing in popularity as a tranquil oasis for a desert getaway for travelers and one of California’s hottest real estate zip codes for investors. 

Get Your Rental Properties and Investment Properties Managed with Savvy VRM

The main criteria for identifying the best places to invest in rental properties in California is having an understanding of the ever-changing vacation rental industry and the complex short-term rental rules and regulations of each market before making an investment decision. 

Take the next step to buying a short-term rental in California with Savvy Vacation Rental Management! Our industry experts are ahead of the market trends and will connect you to the right people, unlock the full potential of your investment, and even welcome your guests!