Investing in California Real Estate

The Best California Real Estate Markets: Affordable and Not So Affordable Areas

So you’re interested in California real estate market? It’s no secret that California real estate market is among the most prosperous across the nation. One problem — you don’t know where to start. The options are vast and the prices are overwhelming to say the least. If you’ve done some research on investing in California real estate, you’ll have read or heard about California’s “supply shortages and affordability constraints” multiple times.

The California Association of Realtors (CAR) predicted that inventory shortages as well as price increases will persist in the 2016 California real estate market. And so far these predictions have been nothing but true. CAR’s forecasts for 2017 report that the above conditions will continue, while an increase in sales may occur in inland areas of California where property is more affordable.

The California real estate market is a seller’s market in most areas due to supply shortages and increasing demand and prices. It is also expected that the demand for California real estate market will remain high because California economy is seeing enormous growth on many levels.

Related: 5 Ways to Find a Buyer’s Market

Cities with Affordable Neighborhoods

Los Angeles

Los Angeles is the second largest city in the US and one of the most thriving. The business, tech industry, healthcare, finance and banking sectors are all doing extremely well — a fact which is driving more people to move into LA and driving the property demand up. This can be seen as an opportunity to invest in traditional rental properties. It is also important to mention LA’s touristic significance, which makes it a great Airbnb investment opportunity with an average Airbnb rental income of $3,158/mo. LA’s got the best of both worlds.

The California Association of Realtors reported a 13.3% decrease in home sales in LA between June 2015 and June 2016 due to the high prices. While the median home price increased by 4.8% since last year to become $1,234,050 this year. Property prices today are at their highest in years. At the same time, most recent analysis on LA suggests that the city is entering a “cooling” period where prices may experience a small breather. If this is the case, then investing in Los Angeles real estate will become even more attractive.

Los Angeles is also seeing some new construction, especially for single family properties, where permits for construction have increased by 17.1%.

If you are considering California real estate, Los Angeles is definitely the place to start. Take a look at two of Los Angeles’ most affordable, good investment, neighborhoods.

Boyle Heights

Boyle Heights resides between Downtown and East Los Angeles. It’s among the more affordable neighborhoods in LA which show favorable data. It is a youthful neighborhood. And while located in more residential area, it has convenient access to downtown and the Arts District which makes it preferred Airbnb destination. Take a look at Mashvisor’s data on Boyle Heights.

  • Median Home Price: $420,000
  • Airbnb Occupancy Rate: 55%
  • CoC Return
  • Airbnb: 4.88%
  • Traditional: 1.88%

Average Rental Income/month

  • Airbnb: $2,396
  • Traditional: $1,504
  • Optimal investment: 6-bedroom house rented out on Airbnb

South Los Angeles

South Los Angeles is bordered by downtown LA. The neighborhood is diverse and vibrant with its student communities. A large number of University of Southern California students reside in South Los Angeles which makes it a good opportunity for investment in traditional rental properties.

  • Median Home Price: $355,150
  • Airbnb Occupancy Rate: 57%
  • CoC Return
  • Airbnb: 4.45%
  • Traditional: 4.09%

Average Rental Income/month

  • Airbnb: $1,708
  • Traditional: $2,012
  • Optimal investment: 5-bedroom townhouse rented out traditionally

Related: Los Angeles Real Estate Investing: 4 Reasons to Jump In

San Francisco

When it comes to California real estate, San Francisco is what most people think about first.

It is no secret investing in San Francisco real estate is one of the hottest and most in-demand in California and nationwide. The City by the Bay is considered an ideal location for both traditional and Airbnb investments. San Francisco is also among the most expensive cities in the US, and property prices continue to increase while inventory is low. It therefore comes to no surprise that investing is not the easiest in San Francisco, but it definitely pays off in the return an investor receives.

Take a look at the two most affordable traditional and Airbnb neighborhoods in the city.

Visitacion Valley or “Viz Valley”

Visitacion Valley is a more isolated neighborhood in the southeastern quadrant of the city. It’s known for its green areas and family-oriented vibes. More recently, the neighborhood has been moving towards housing more locals in efforts of improving a community lifestyle. For that, Viz Valley can be seen as a better Airbnb investment.

  • Median Home Price: $649,500
  • Airbnb Occupancy Rate: 59%
  • CoC Return
  • Airbnb: 2.3%
  • Traditional: 1.34%

Average Rental Income/month

  • Airbnb: $2,698
  • Traditional: $2,085
  • Optimal investment: 3-bedroom house rented out on Airbnb

Alamo Square

Alamo Square is a more low-key residential neighborhood within Western Addition in San Francisco. It’s mostly famous for Alamo Square Park, its cool and casual dining experiences, and great views of downtown San Francisco. It’s considered among the top affordable neighborhoods in the city and is a great traditional investment.

  • Median Home Price: $700,000
  • Airbnb Occupancy Rate: 38.57%
  • CoC Return
  • Airbnb: 1.45%
  • Traditional: 5.69%

Average Rental Income/month

  • Airbnb: $2,176
  • Traditional: $4,802
  • Optimal investment: 5-bedroom apartment rented out traditionally

Related: Buying Investment Properties in San Francisco

The More Expensive Cities

Santa Monica

Santa Monica is yet another city where demand for real estate properties is high. But like many of California real estate market cities, it is expensive. Santa Monica’s real estate market shows a lot of potential where single-family homes have topped the market. Townhouses and condos are an also popular investment, especially for investment in traditional rental property.

Santa Monica’s real estate market is a seller’s market. While buyers do have a little bit of negotiating power, sellers have the most advantage due to the low inventory levels.

To see the potential in investing in Santa Monica real estate market, take a look at Mashvisor’s breakdown of the city’s data.

  • Median Home Price: $1,399,000
  • Airbnb Occupancy Rate: 66%
  • CoC Return
  • Airbnb: 2.28%
  • Traditional: 1.96%

Average Rental Income/month

  • Airbnb: $4,577
  • Traditional: $3,876
  • Optimal investment: 6-bedroom single-family home rented out traditionally

Beverly Hills

Beverly Hills has seen a 24% increase in median home prices since last summer, and is expecting a further rise in prices in 2017. Properties in Beverly Hills spend an average of one to three months in the market, and most of the good ones get snatched quickly. So if you are considering Beverly Hills as your next investment, jump in now!

Single family home construction and sales dominate the Beverly Hills real estate market at the moment. So this is where you should be looking. Search Beverly Hills on Mashvisor to view property listings and their comps to make the ideal investment.

Here’s our breakdown of the city’s data.

  • Median Home Price: $3,599,000
  • Airbnb Occupancy Rate: 55%
  • CoC Return
  • Airbnb: 1.95%
  • Traditional: 2.09%

Average Rental Income/month

  • Traditional: $6,215
  • Optimal investment: 5-bedroom single-family home rented out traditionally

Check out different properties on Mashvisor.

West Hollywood (WeHo)

West Hollywood is located west of Los Angeles, within the Los Angeles County. It is a stylish, warm and entertaining city which attracts Angelenos and tourists alike.

West Hollywood has seen a 9% increase in median home prices since last summer to top at $966,940 this year. Multi-unit construction and sales dominate the West Hollywood real estate market, so this is where you should be looking.

West Hollywood comprises of several neighborhoods such as neighborhoods the Norma Triangle, Melrose District, West Hollywood Heights, West Hollywood North, West Hollywood East, and West Hollywood West. To view data for these and for property listings, use Mashvisor’s analytical investment tools.

  • Median Home Price: $966,940
  • Airbnb Occupancy Rate: 61%
  • CoC Return
  • Airbnb: 2.64%
  • Traditional: 2.86%

Average Rental Income/month

  • Airbnb: $4,358
  • Traditional: $5,006
  • Optimal investment: 5-bedroom single-family home rented out traditionally

As you can see, there are diverse possibilities when it comes to California real estate. We’ve highlighted the current hottest markets which are both profitable in traditional as well as Airbnb investment. For more information on these cities, and others within California real estate, visit Mashvisor and search for the desired city to view and adjust data, compare properties, and choose the best type of investment for you.


Originally published at www.mashvisor.com on October 15, 2016.