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With an average rental yield of around 7% for long-term investments—and short-term vacation rentals yielding between 8% and as high as 14.73%—California is a great place to own a rental property.
Whether you’re interested in long-term rentals or short-term vacation stays, California’s robust tourism, strong job markets, and enviable lifestyle make it a compelling choice. To help you find the best spots, we’ve put together two lists—one for long-term rentals and one for short-term rentals—ranked by rental yield. Find out where you can get the best returns!
Table of Contents
Best Places to Buy a Rental Property in California
The California real estate market has many great cities for investment opportunities. Here are 11 of the best places to buy a rental property in California in terms of both short and long-term rentals:
Top Cities for Short-Term Rental Investment in California
Short-term rentals (STRs) can be highly profitable, especially in cities with high tourist traffic, outdoor attractions, and limited hotel options. These California cities offer strong rental yields, making them ideal for Airbnb and vacation rental investments.
1. Truckee
Truckee is a premier destination for outdoor enthusiasts, offering world-class skiing and hiking and being close to Lake Tahoe. The area’s limited hotel options make short-term rentals preferred for visitors, leading to high occupancy rates, especially in peak winter and summer seasons. Truckee’s desirability also contributes to strong property appreciation over time. The cost of living is 19% higher than the national average, driven by housing and transportation costs.
Average Home Price (Median): $603,895.37
Average Rent (Monthly): $2,649.68
Annual Rent: $31,796.19
Rental Yield: 14.73%
Key Tourism Factor: Over 1.2 million visitors annually
2. Clearlake
Clearlake is gaining traction as a vacation rental market, offering affordable home prices and high returns. Known for fishing, boating, and wine tourism, Clearlake attracts weekend travelers looking for outdoor recreation. Unlike more significant tourist destinations, Clearlake has lower STR competition, allowing for strong rental rates. The cost of living is 5% lower than the national average, making it an affordable investment location.
Average Home Price (Median): $307,297.42
Average Rent (Monthly): $1,997.22
Annual Rent: $23,966.67
Rental Yield: 12.02%
Key Tourism Factor: Approximately 500,000 visitors each year
3. Santa Rosa
Santa Rosa is located in the heart of Sonoma County’s wine country and benefits from year-round tourist demand. The area attracts visitors for wine tastings, hiking trails, and coastal getaways, ensuring high short-term rental occupancy. With high nightly rental rates, STR investors in Santa Rosa can generate strong cash flow. However, the cost of living is 33% higher than the national average, primarily due to housing and food costs.
Average Home Price (Median): $818,073.07
Average Rent (Monthly): $3,360.74
Annual Rent: $40,328.83
Rental Yield: 10.49%
Key Tourism Factor: Roughly 4 million visitors annually
4. Napa
As one of the world’s most famous wine tourism destinations, Napa attracts millions of visitors annually. The consistent demand from wine lovers, honeymooners, and luxury travelers ensures high occupancy for STRs. Napa’s premium rental market supports high nightly rates, making it one of the most profitable vacation rental markets. However, the cost of living is 52% higher than the national average, reflecting its upscale lifestyle.
Average Home Price (Median): $906,009.64
Average Rent (Monthly): $3,791.44
Annual Rent: $45,497.32
Rental Yield: 9.42%
Key Tourism Factor: Approximately 3.7 million visitors annually
5. Ukiah
A hidden gem in California’s wine country, Ukiah is seeing increasing tourism appeal. Home prices are lower than in Napa and Sonoma, making it more affordable for investors. The city attracts visitors with boutique wineries, hot springs, and outdoor recreation. The cost of living is 6% lower than the California average, offering a budget-friendly investment option while still benefiting from wine country tourism.
Average Home Price (Median): $496,555.45
Average Rent (Monthly): $2,290.28
Annual Rent: $27,483.33
Rental Yield: 8.64%
Key Tourism Factor: Around 250,000 visitors annually
6. San Luis Obispo
A college town with strong tourism, San Luis Obispo benefits from year-round demand. Visitors are drawn to its charming downtown, nearby beaches, and wine country. The combination of student visitors, business travelers, and tourists ensures steady STR income. Proximity to Pismo Beach further boosts rental desirability. However, the cost of living is 38% higher than the national average, mainly due to housing prices.
Average Home Price (Median): $901,063.78
Average Rent (Monthly): $3,763.54
Annual Rent: $45,162.53
Rental Yield: 8.10%
Key Tourism Factor: Over 1 million visitors per year
Why These Cities Are the Best for Short-Term Rentals
Short-term rentals thrive in high-tourism destinations, outdoor recreation hubs, and areas with limited hotel options. These cities stand out for STR investments due to the following:
✅ High Rental Yields— Cities like Truckee (14.73%) and Clearlake (12.02%) offer some of the highest STR returns in California, maximizing income potential.
✅ Strong Year-Round Tourism— Destinations like San Diego, Napa, and Santa Cruz attract visitors throughout the year, ensuring high occupancy rates.
✅ Limited Hotel Availability— Locations such as Eureka, Ukiah, and Clearlake have fewer hotel options, making short-term rentals the preferred accommodation for travelers.
✅ Outdoor Attractions & Adventure Tourism— Cities like Truckee (skiing), San Luis Obispo (beaches), and Santa Rosa (wine country) draw tourists looking for unique vacation experiences, driving STR demand.
✅ High Nightly Rates— Premium markets like Napa and Santa Rosa command high per-night earnings, leading to substantial cash flow.
✅ Flexibility for Personal Use— Investors can use the property for personal vacations when not rented out, adding value beyond just rental income.
✅ Opportunities for Niche Markets— Some cities cater to specific guest groups, such as:
- Wine tourism in Napa & Santa Rosa
- Ski travelers in Truckee
- Eco-tourism & hiking in Eureka
These cities present California’s best short-term rental investment opportunities for investors looking to maximize profits, capitalize on high tourist demand, and take advantage of unique vacation markets.
Top Cities for Long-Term Rental Investment in California
Investing in long-term rental properties is a great way to generate passive income and build wealth, especially in cities with strong rental demand, economic growth, and affordable housing prices. These California cities stand out due to their high rental yields, job opportunities, and increasing populations, making them excellent choices for real estate investors.
1. Hanford
In the San Joaquin Valley, Hanford is one of California’s most affordable metropolitan areas, with living costs 1.6% below the national average and housing prices 31% below national norms. The city benefits from its proximity to major agricultural and industrial hubs, ensuring steady employment opportunities and a growing rental market. Additionally, the presence of Naval Air Station Lemoore creates a consistent demand for rental housing, providing investors with a stable tenant base. Hanford’s affordability makes it attractive for long-term renters, particularly families and military personnel seeking cost-effective housing.
Average Rent (Monthly): $2,128.63
Annual Rent: $25,543.50
Average Home Price (Median): $348,357.37
Rental Yield: 7%
Job Growth (Last Decade): Around 5%
2. Bakersfield
Bakersfield, California’s oil and agriculture capital, offers a strong job market with diverse employment opportunities, driving rental demand. The city’s cost of living is 24% lower than in Los Angeles, making it attractive for renters looking for affordability. Over the last decade, a population growth of 11% has led to higher rental demand, ensuring a steady cash flow for investors. Bakersfield also benefits from its proximity to major highways and distribution centers, making it a key hub for logistics and transportation industries.
Average Home Price (Median): $357,888.35
Average Rent (Monthly): $2,176.39
Annual Rent: $26,116.72
Rental Yield: 7%
Job Growth (Last Decade): 8–10%
3. Madera
A rapidly developing city near Fresno, Madera is gaining attention for its affordable housing and suburban appeal. Its strategic location along Highway 99 is key for logistics and transportation jobs. Living costs are 20% lower than in San Francisco, attracting families and working professionals seeking affordable housing. Additionally, Madera offers a quiet suburban lifestyle while still within commuting distance of larger economic centers.
Average Home Price (Median): $410,169.05
Average Rent (Monthly): $2,365.78
Annual Rent: $28,389.33
Rental Yield: 7%
Job Growth (Last Decade): 6%
4. Fresno
As the largest city in Central California, Fresno has a diverse economy driven by agriculture, healthcare, and education. Home to California State University, Fresno has a large student population, increasing rental demand. Compared to coastal cities, home prices remain affordable, making it an attractive market for investors and renters. Additionally, Fresno’s cost of living is 23% lower than Los Angeles’s, making it an appealing option for those seeking urban amenities without the high price tag.
Average Home Price (Median): $403,443.36
Average Rent (Monthly): $2,311.43
Annual Rent: $27,737.21
Rental Yield: 7%
Job Growth (Last Decade): 8%
5. Visalia
Visalia, an agricultural hub, offers substantial employment opportunities in farming, healthcare, and retail. Its affordable cost of living is 19% below the California average, attracting families and young professionals seeking rental homes. The city also sees increasing commercial and residential development investment, further solidifying its position as an attractive rental market.
Average Home Price (Median): $348,236.80
Average Rent (Monthly): $1,962.53
Annual Rent: $23,550.40
Rental Yield: 7%
Job Growth (Last Decade): 7%
Why These Cities Are Top Choices for Long-Term Rentals
These cities offer a combination of affordability, strong job markets, and growing populations, making them ideal for long-term rental investments. Here’s why:
✅ High Rental Yields (6- 7%)—These cities provide some of the best rental returns in California, ensuring positive cash flow.
✅ Strong Employment Hubs— Cities like Sacramento, Bakersfield, and Fresno have diverse economies, including government, healthcare, logistics, and agriculture, leading to steady rent demand.
✅ Growing Populations— Many of these cities, such as Madera, Visalia, and Modesto, attract new residents due to their affordability, creating a sustained need for rental housing.
✅ Lower Home Prices Compared to Major Metros— Investing in long-term rentals in cities like Stockton or Vallejo is more cost-effective than buying in Los Angeles or San Francisco, allowing for better cash flow and appreciation potential.
✅ Proximity to Major Urban Centers— Some cities, like Riverside and Stockton, offer affordable living near expensive job markets (Los Angeles and the Bay Area), making them attractive to long-term renters.
✅ Fewer Regulatory Challenges— Unlike short-term rentals, long-term rentals face fewer restrictions and zoning laws, ensuring stability for investors.
✅ Consistent Tenant Demand— The combination of college students (Fresno, Sacramento), military personnel (Hanford), and professionals ensures a steady supply of renters.
These cities provide some of California’s best long-term rental opportunities for investors looking for stable income, lower turnover, and long-term appreciation.
Finance Your Rental Property Using Its Income
Want to invest in rental properties without the hassle of income verification? With a DSCR (Debt Service Coverage Ratio) loan, you qualify based on your property’s rental income—no W-2s, pay stubs, or tax returns required.
You can secure financing if your rental income covers the mortgage expenses. This 30-year fixed investment loan allows you to finance multiple investment properties and refinance existing ones without personal income verification. It makes it easier to scale your portfolio while keeping your cash flow strong.
Check out HomeAbroad’s DSCR Loan and finance your next investment with ease. To learn more about how these loans work, eligibility criteria, steps to apply, and how they can help real estate investors secure financing without traditional income verification, visit HomeAbroad’s DSCR Loan Guide.
Invest in California Rental Properties with HomeAbroad
California’s rental market offers profitable opportunities in cities like San Francisco, Los Angeles, San Diego, and Sacramento. However, smart investments require market insight and strategic planning, and we make your investment journey seamless and more effortless.
HomeAbroad is your one-stop PropTech and FinTech platform that simplifies US real estate purchases for international buyers. We specialize in investment property loans and offer the best loan terms with fast approvals.
HomeAbroad’s AI-powered search helps you find the right property, while a network of 500+ expert agents and comprehensive concierge services—from setting up an LLC to managing property insurance and banking—ensure a seamless experience.
Invest wisely and make your US real estate dreams a reality with HomeAbroad. Get your rate quote today!
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FAQs
Is California Still a Good Place to Invest in Real Estate?
Yes, California is a popular and potentially profitable place to invest in real estate due to its strong economy and high demand for housing.
What is the Average ROI on Rental Property in California?
The average ROI on rental property in California varies depending on location and market conditions. Thorough research and analysis are recommended before making any investment decisions.
What is a Good Salary to Buy a Rental Property in California?
Buying a rental property in California does not require a specific salary, as it depends on the property’s price and location.
What is the 1% Rule for Rental Property in California?
The monthly rent of a rental property should be at least 1% of the property’s total purchase price. For example, if a rental property costs $500,000 to purchase, the monthly rent should be at least $5,000.
How Does HomeAbroad Help?
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