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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 improved 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
Top 11 Places to Buy a Rental Property in California
The California real estate market has many great cities for investment opportunities. With years of experience in the real estate market, I’ve seen firsthand which cities offer the best investment opportunities. Over time, specific locations in California have consistently provided strong returns for short-term and long-term rentals.
Let’s look at 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
If you’re eyeing a short-term rental investment, you’ll need to focus on places that attract many visitors, offer exciting outdoor activities, or have a shortage of hotel accommodations. Here’s why these cities stand out:
High Rental Yields: Cities like Truckee (with an impressive 14.73%) and Clearlake (12.02%) boast some of California’s best short-term rental returns, giving you an excellent income potential.
Year-Round Tourist Appeal: Locations like San Diego, Napa, and Santa Cruz draw crowds year-round, keeping higher occupancy rates and rental income flowing.
Limited Competition: In spots like Eureka, Ukiah, and Clearlake, the limited number of hotels makes short-term rentals the go-to choice for travelers looking for a stay.
Outdoor Adventures: Whether skiing in Truckee, relaxing on the beaches of San Luis Obispo, or exploring the wine country in Santa Rosa, these cities attract visitors seeking unique experiences, fueling the demand for short-term rentals.
High Nightly Rates: Premium areas such as Napa and Santa Rosa can cost up to top dollar per night, which leads to substantial cash flow for investors.
Personal Usage Flexibility: If you’re not renting your property out, you can use it for your getaways, adding personal value beyond the rental income.
Niche Market Opportunities: Certain cities cater to unique tourist interests, including:
- Wine lovers in Napa & Santa Rosa
- Ski enthusiasts in Truckee
- Eco-tourists and hikers in Eureka
Overall, these cities offer some of California’s best short-term rental investment opportunities for investors looking to maximize profit, 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 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 combine affordability, robust job markets, and increasing populations, making them prime candidates for long-term rental investments. Here’s the explanation:
High Rental Returns: These cities present some of California’s highest long-term rental yields, ensuring positive cash flow.
Robust Employment Centers: Cities such as Sacramento, Bakersfield, and Fresno have varied economies, including sectors like government, healthcare, logistics, and agriculture, which result in consistent demand for rentals.
Increasing Populations: Many of these cities, including Madera, Visalia, and Modesto, draw in new residents because of their affordability, creating a lasting requirement for rental properties.
Affordable Home Prices: Investing in long-term rental properties in places like Stockton or Vallejo is more economical than purchasing in major metropolitan areas like Los Angeles or San Francisco, providing improved cash flow and potential for appreciation.
Proximity to Important Urban Areas: Cities such as Riverside and Stockton present affordable living options close to costly job markets (Los Angeles and the Bay Area), making them appealing to long-term renters.
Reduced Regulatory Obstacles: Unlike short-term rentals, long-term rentals encounter fewer restrictions and zoning regulations, ensuring more excellent stability for investors.
Steady Tenant Demand: The influx of college students (Fresno, Sacramento), military personnel (Hanford), and professionals guarantees a reliable pool of renters.
These cities represent California’s best long-term rental investment opportunities for investors seeking reliable income, lower turnover rates, and long-term appreciation.
Finance Your California Rental Property with HomeAbroad’s DSCR Loan
California’s rental market offers excellent investment opportunities, but securing financing without traditional income verification can be challenging. That’s where HomeAbroad’s DSCR (Debt Service Coverage Ratio) loan helps.
With a DSCR loan, you can qualify based on your property’s rental income without extensive documentation like W-2s, pay stubs, or tax returns. The only criterion is that your rental income must cover your mortgage expenses. With this loan, you can easily buy or refinance multiple properties, making it easier to grow your portfolio while maintaining positive cash flow and property appreciation.
HomeAbroad simplifies real estate investment for global investors with AI-powered property searches, a network of 500+ expert agents, and concierge services for LLC setup, insurance, and banking.
Take advantage of California’s rental market and quickly grow your real estate portfolio. 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.
At HomeAbroad, we ensure the reliability of our content by relying on primary sources such as government data, industry reports, firsthand accounts from our network of experts, and interviews with specialists. We also incorporate original research from respected publishers when relevant. Discover more about our commitment to delivering precise and impartial information in our editorial policy.
Zillow: Home Values
AirDNA: Short-Term Rental Data
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