Real estate investors nationwide are now showing a growing interest in investment properties located in California to enhance their rental portfolios. The Golden State has become a preferred choice among real estate investors for various convincing factors, such as a strong economy, appealing pricing, and steady rental market conditions. At the forefront of this trend, Easy Street Capital is excited to serve as a leading source of investment property loans for those seeking to build rental portfolios in California!
Types of Investment Property Loans for California Real Estate Investors
When it comes to real estate investing in California, there are a variety of markets and types of investment property loans to choose from. California has plenty of older properties in need of renovators to restore them to rent-ready status. For investors adept at rehabbing older properties, hard money renovation loans are a perfect choice! These investment property loans allow you to buy a property quickly and finance your rehab costs as well! Once you are done, you can either “flip” the property for a quick return or pursue the BRRRR Strategy by renting it out and then refinancing into a long-term, low-rate DSCR loan!
Long-term DSCR Loans are also great for investing in turnkey rental properties. Turnkey refers to properties that are already rent-ready and require no renovations. Move-in ready single family homes and multi-unit properties (such as duplexes or triplexes) are great for cash flow and price appreciation. Most DSCR Loans are fixed rate for thirty years, locking you into a fixed interest rate for the long-term. While, if historical patterns continue, rents and appreciation increase steadily each year. Bottom line, debt costs stay the same while cash flow increases!
Where To Invest In Real Estate In California
California stands as a preferred destination for real estate investors owing to its wide array of options and diverse geographical features. As the largest state in the nation by population, California offers a range of markets and prospects suitable for various types of real estate investors. The cities featured in this article encompass a blend of well-established metropolises and burgeoning smaller markets.
Los Angeles stands as a beacon of creative vibrancy, hosting the heart of the entertainment industry that has mesmerized the world. San Diego’s inviting climate and picturesque coastline offer a paradise for outdoor enthusiasts, making it a mecca of coastal relaxation and adventure. San Francisco’s innovative spirit and technological prowess have catalyzed groundbreaking advancements across sectors, shaping the landscape of modern progress. In contrast, Fresno, despite its agricultural significance, has transformed into a thriving cultural and economic center.
Joshua Tree’s awe-inspiring desert vistas provide a lugubrious yet strangely beautiful landscape that captivates nature lovers and soul seekers. Sacramento, as the state’s capital, boasts a rich political heritage and plays a pivotal role in shaping California’s legislative future. Santa Cruz embraces a laid-back, bohemian atmosphere, where the rhythm of waves and the scent of redwoods infuse life with an effortlessly cool vibe. Meanwhile, Palm Springs basks in luxurious tranquility, offering an oasis of relaxation and rejuvenation amidst the desert’s heat.
Los Angeles
With a population of roughly 4 million, Los Angeles is renowned for its cultural diversity and offers an extensive array of real estate investment opportunities. Drawing in both tourists and business travelers, this city is a favored global destination. Iconic landmarks like the Hollywood Sign and the Getty Center contribute to a thriving short-term rental market. Moreover, Los Angeles boasts a plethora of stunning outdoor locations for nature enthusiasts, including Griffith Park and Runyon Canyon. The city’s diverse and dynamic demand drivers position it as a prime locale for short-term rentals. Investors often set their sights on coveted neighborhoods such as Beverly Hills, Santa Monica, and Downtown LA. Beyond its attractions, Los Angeles is a cultural hub with a rich arts scene and a tantalizing culinary landscape.
Los Angeles is a lucrative, highly competitive real estate market. As of January 2024, the average home sale price in LA for a three-bedroom was $977,200 according to Rocket Homes. Price is perhaps the biggest barrier to entry in this market. While this market may be relatively inaccessible to newer investors or those with less available capital, it remains a solid market for rentals. The Zillow Home Value Index in Los Angeles (a metric indicating typical home values in a market) increased by 6.26% year-over-year as of December 2023. High purchase prices and general unaffordability of homes have created a strong and consistent demand for rental properties.
In the Los Angeles real estate market, strategic property acquisitions near bustling employment centers provide a distinct advantage for investors. The demand for flexible housing solutions, driven by the city’s employment opportunities, creates a specialized market poised for growth. This presents real estate investors with a tangible opportunity to capitalize on consistent rental income and potential property value appreciation. A dynamic job market and evolving housing demands make this a compelling market for well-positioned investors.
San Diego
San Diego, located along California’s southern coast, is a vibrant city with a population surpassing 1.4 million. Positioned in proximity to Los Angeles, it is an integral part of the larger Los Angeles-San Diego metropolitan region. The city enjoys a diverse and thriving economy, propelled by sectors like biotechnology, tourism, defense, and higher education. Notable employers include Qualcomm and UC San Diego Health.
San Diego benefits from its strategic coastal position and close proximity to the San Diego International Airport, enhancing its appeal to real estate investors. Serving as a significant gateway for travelers crossing between the United States and Mexico, the airport’s influence contributes to the need for short-term lodging and convenient travel options in the region. Additionally, investors specializing in student housing have ample cash-flowing options to choose from. As the name would suggest, San Diego State University is located in this city with an enrollment of more than 30,000 students.
San Diego presents a favorable opportunity for investors to take advantage of its stable rental market. As of February 2024, the average market rent in San Diego stands at $3,000 per month, offering promising returns on investment, per Zillow. Moreover, the average home value is $960,202, a 7.1% increase over the past year. A business-friendly environment and cost-effectiveness attract investors eager to profit from the San Diego’s real estate potential.
San Francisco
San Francisco, a dynamic city renowned for its cultural diversity and iconic landmarks, boasts a population exceeding 800,000 residents. The city’s thriving industries in technology, real estate, and innovation offer a stable foundation for both renters and investors. San Francisco’s corporate hub lures skilled professionals seeking quality rentals, with giants like Salesforce, Airbnb, and Uber headquartered here.
San Francisco captivates visitors from around the world. Iconic landmarks like the Golden Gate Bridge, Alcatraz Island, as renowned culinary offerings draw tens of millions of tourists annually. The city’s flourishing tourism sector plays a pivotal role in the expansion of short-term rental opportunities. This is evident in prime districts such as Fisherman’s Wharf, Union Square, and the Mission District.
The consistent influx of highly skilled professionals and entrepreneurs seeking housing has bolstered the demand for both rental properties and homes for sale. According to the latest data from the Council for Community and Economic Research, San Francisco had the third highest average sales price of any city in the country at $1,502,557. San Francisco, and Silicon Valley overall, is the hottest rental market in Northern California according to RentCafe. For investors that can afford to enter what is perhaps the most expensive market in the nation, there is certainly money to be made.
Sacramento
Sacramento, nestled in California’s scenic landscape, captivates visitors with its historic charm and vibrant urban atmosphere. The city’s riverside beauty and rich cultural heritage envelop both residents and tourists in a captivating ambiance. Furthermore, Sacramento offers an abundance of outdoor activities, from hiking and biking to exploring its diverse arts and entertainment scene. The city’s range of residential properties and vacation homes presents an alluring prospect for real estate investors, particularly in the thriving short-term rental market.
Relative to the more prominent markets in the state, properties in Sacramento are relatively affordable. As of December 2023, the median sale price of a home in Sacramento increased to $452,500 according to Redfin. As of January 2024, the median rent in Sacramento, CA is $2,000, which is above the national average, but significantly below California’s larger cities. This city continues to grow in population year over year as high sales prices in the Bay Area market are pushing some investors inland towards more affordable properties. Renters make up a high percentage of Sacramento’s growing population of more than half a million. As of Q3 2023, 50.7% of Sacramento homes were tenant-occupied according to Neighborhood Scout. Sacramento’s high renter percentage, affordability versus CA markets, and steady growth make it a favorable choice for real estate investment.
Joshua Tree
Joshua Tree, nestled in California’s high desert, is a vibrant community known for its unique artistic culture and stunning natural landscapes. The town’s dynamic spirit and close connection to Joshua Tree National Park create a distinct and appealing atmosphere. Local businesses and creativity shape Joshua Tree’s authentic identity, giving residents and visitors a genuine regional experience.
Joshua Tree offers a variety of cultural gems that showcase its unique history and thriving artistic community. Landmarks like the Joshua Tree Art Gallery, the Joshua Tree Music Festival, and the Noah Purifoy Outdoor Desert Art Museum, attract visitors seeking creative inspiration. Furthermore, Joshua Tree hosts an array of festivals and gatherings that celebrate its rich cultural tapestry and culinary treasures.
Joshua Tree garners a Market Grade of 75 as recognized by AirDNA. This signifies the city’s immense potential for real estate investors seeking lucrative opportunities. During peak season, the average property operated as an STR in Joshua Tree is projected to generate $5,224 in revenue! Despite the city’s popularity and reputation as an established STR market, median sale prices are still relatively affordable – $401,750 as of December 2023. Joshua Tree presents an enticing prospect for real estate investors seeking to capitalize on a thriving vacation rental market.
Joshua Tree, nestled in California’s high desert, presents an enticing real estate landscape for investors, courtesy of its burgeoning community, diverse local economy, and artistic atmosphere. The town’s growing creative scene, its adjacency to Joshua Tree National Park, and ongoing cultural developments add to its appeal. Whether focusing on residential properties, artistic spaces, or vacation rentals, Joshua Tree offers a spectrum of opportunities for investors looking to harness its unique real estate potential.
Fresno
Fresno, located in California’s Central Valley, hosts a population exceeding 500,000 residents. Featuring a varied economy with a focus on sectors like agriculture, healthcare, and education, Fresno provides a strong job market and rental stability. Prominent companies like Foster Farms and Community Medical Centers contribute to the city’s economic vitality, attracting a skilled labor force in search of rental housing options.
Fresno, as a notable cultural and business hub, beckons visitors from various regions. The city’s acclaimed features, such as the Fresno Chaffee Zoo, Woodward Park, and diverse dining options, establish an enticing magnet for tourists. These elements play a role in a flourishing short-term rental sector. Neighborhoods like Tower District, Downtown Fresno, and Fig Garden specifically have seen notable growth.
Investors in Fresno can capitalize on the city’s solid rental market. According to Neighborhood Scout, the average market rent as of Q3 2023 in Fresno was $2,094 per month, offering favorable returns on investment. Additionally, 53.2% of the city’s homes are tenant-occupied. The average price of a home as of December 2023, according to Redfin, is $360,000. Affordable property prices, a growing job market, and proximity to major cities make Fresno an appealing market for investors.
Santa Cruz
Santa Cruz, nestled along California’s picturesque coastline, is a vibrant city renowned for its unique character and captivating attractions. The city’s diverse and dynamic economy is propelled by sectors such as education, tourism, and technology. Prominent institutions like the University of California, Santa Cruz, and local tech companies contribute to the city’s economic vitality.
Cultural treasures abound in Santa Cruz, enriched by its rich history and thriving arts community. The city’s iconic landmarks draw in numerous visitors annually. Noteworthy sites include the Santa Cruz Beach Boardwalk, the Santa Cruz Museum of Art and History, and the historic Santa Cruz Wharf. Additionally, Santa Cruz hosts an array of festivals and events that celebrate its diverse cultural heritage.
Santa Cruz earned an overall market grade of B- on AirDNA. Most of the downside can be attributed to the fact that this is a very pricy market. The median sale price of a home was $1,087,500 as of December 2023 (Redfin). Average projected monthly revenue for properties operated as STRs in Santa Cruz is $6,274, according to AirDNA. While the higher price points are certainly a significant hurdle for investors to overcome, those who can afford to enter this market can benefit from solid cashflows – whether the property is operated as a short-term or long-term rental. According to Neighborhood Scout, average market rent in Santa Cruz is $4,696 and 61.7% of properties are tenant occupied.
Palm Springs
Palm Springs, nestled in the heart of California’s desert, is a captivating blend of timeless charm and desert elegance. Renowned for its stunning landscapes, modern architecture, and vibrant arts scene, Palm Springs offers a unique experience for visitors. The city’s storied past is embodied in its diverse array of attractions, including the Palm Springs Art Museum and the historic Palm Canyon Drive. Downtown Palm Springs’ distinctive architecture and stylish boutiques create a captivating ambiance for both residents and tourists. Outdoor enthusiasts can indulge in activities like hiking, golfing, and exploring the breathtaking Joshua Tree National Park. Palm Springs’ real estate market reflects its exceptional allure, providing a range of opportunities for both homeowners and astute investors.
Palm Springs’ average home value of $648,969 as of December 2023 (Zillow) highlights the overall stability and desirability of the city’s real estate offerings.
Perhaps the most significant factor contributing to Palm Springs’ surging real estate market is its tourism industry. The city’s thriving tourism sector has a direct positive impact on the real estate market, supporting 1 in 4 jobs in the region. In 2022, there were 14.1 million visitors as reported by Visit Greater Palm Springs. Visitor spending totaled $7.1 billion, which was a 26% increase over the prior year. According to AirDNA, average monthly revenue is currently projected at roughly $5,840. Overall, Palm Springs’ distinct allure and steadily increasing visitor count position the city as an enticing market for STR investors.
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Ready to invest in real estate in California? Easy Street Capital is top lender for rental loans in California, both hard money rehabs and long-term or short-term rental properties.
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