To determine the investment potential of any given place, you’ve got to do some research and see what benefits it has going for it and what could drive future growth in the area.
Whether looking for the most appealing things about a popular place or discovering hidden real estate gems that have been waiting to be discovered, digging into the next great place to invest in real estate is rewarding in every sense of the word.
But you don’t have to break out the whole map in order to find the best places to invest in real estate. All you need is a map of the Golden State.
The Best Places for Real Estate Investments in California
California is renowned for having some of the planet’s most valuable real estate assets. Let’s look into what makes a place such a great real estate investment and all the places in California that fit the bill.
- Los Angeles
- San Jose
- San Diego
- Santa Rosa
- San Bernardino
- San Francisco
1. Los Angeles
If there’s one area in California where real estate investors can count on the potential of their assets, it’s Los Angeles.
Los Angeles is home to some of the most competitive neighborhoods in the country. Residential properties in neighborhoods like Santa Monica, Beverly Hills, and Malibu, attract vast yields of capital from around the world.
Between its dominant film and entertainment industry and the seminal importance of the port of Los Angeles, the job market in this city is explosive. Across sectors, Los Angeles offers real estate investors the best assets in the business.
2. San Jose
Sitting at the heart of Silicon Valley, it’s little wonder that San Jose real estate is so robust. It is in a great position by having access to some of the most high-powered tech jobs in the country right in its backyard.
From neighborhoods like Willow Glen, perfect for commuters who want a cozy suburban feel in the city, to a vibrant downtown scene replete with restaurants and bars, San Jose is drawing in young professionals starting their careers and their families.
Apple and NVidia are two examples of high-powered job providers in the area that continue to draw in high-income earning professionals. With such an enduring tech presence, more and more people will continue turning to San Jose, which means the real estate market here is as reliable as it can be.
The capital of the Golden State is often passed over next to some of the more popular locations in California. The home of the state government, Sacramento is a reliable place to invest in real estate because the political job market will always be fueling the economy here.
Because of its political importance, Sacramento is almost guaranteed to draw in a steady population of people within its city limits. Many residential neighborhoods will appeal to young families, like East Sacramento and Land Park.
Old Sacramento is packed with retail storefronts and dining options that serve the movers and shakers that call this capital home.
4. San Diego
Most people think of Los Angeles and San Francisco as California’s most iconic cities. But San Diego is gaining on these cities real fast. The San Diego metropolitan area is expected to grow by about 1.25 million people by 2050, adding 500,000 new jobs and additional 388,000 units of housing.
In addition to the gorgeous weather and great surf, San Diego has gathered some high-powered companies within its city limits, boosting its appeal to young professionals and investors alike. Northrop Grumman, the aerospace and defense company, has a large presence in San Diego.
5. Santa Rosa
The Santa Rosa area in northern California is located in the vineyard-rich Sonoma county.
This part of the state draws in significant amounts of tourism to tour micro-wineries, giants like Korbel, and up-and-coming breweries like the Russian River. The vacation economy in the area is extremely strong, with demand for rental properties an alluring prospect for enterprising investors.
Santa Rosa is a compelling place to invest in real estate between the wine and beer paradise and the family-friendly vacation atmosphere along the Russian River.
6. San Bernardino
That it lies just outside the orbit of the Los Angeles area, San Bernardino has a lot going for it that makes this city a compelling real estate investment.
Amazon has recently set up shop in the area significantly, adding to the city’s job growth. Rental demand is consistently high due to the ever-rotating student going through the local colleges like UC Riverside.
7. San Francisco
The real estate market in one of the country’s most iconic tech hubs is guaranteed to outperform pretty much everywhere else.
San Francisco doesn’t just draw tech talent from across the United States but from worldwide. Twitter, Google, and the biggest names in the industry have their headquarters in San Francisco.
On top of the popular appeal of this city in general, the most competitive neighborhoods in San Francisco are a shoo-in for lucrative real estate investment.
What Makes a Place A Good Real Estate Investment?
Here are a few trends that you should keep an eye out for in the California real estate market.
- High Job Growth Indicates a Good Real Estate Investment
- High Rental Demand Indicates a Good Real Estate Investment
- Population Growth Indicates a Good Real Estate Investment
Finding the right property is about identifying the trends that make a good investment.
Once you train your eye to notice the economic shifts that drive the real estate market and see where they’re headed, you gain invaluable insight on making the right call for your next investment.
High Job Growth Indicates a Good Real Estate Investment
Strong job growth is one of the best indicators of a strong economy, as job growth is a safe indicator of increased cash flow in a given place.
Naturally, if the economy is better because of local job growth, you can expect the local real estate market to follow suit.
With more people employed in the area, more money circulates in the local economy. This translates into more purchases at local retail stores, more dining out at local restaurants, and more demand for housing in the area.
Jobs are such a reliable indication of a strong real estate market because so much of our lives depend on our job. People within a reasonable distance to where they work. Furthermore, when people land better jobs, they can make a deeper commitment to housing.
People are more likely to sell their old homes and upgrade to new ones. It’s not just residential real estate that benefits from job growth.
With higher employment rates in an area, companies need office space to house their employees and run their businesses. Commercial real estate is primed for success when an area experiences job growth.
Not only do businesses need to rent the space to conduct their business, but with more capital being circulated in the economy, businesses leasing commercial property are more likely to pay their rent as their profits increase.
Across sectors, job growth is an encouraging indication that the real estate market is primed for investment. Looking into an area’s job growth or prominent job providers can provide you with some key insights into its real estate potential.
High Rental Demand Indicates a Good Real Estate Investment
The degree of rental demand in a given place is about as clear a sign as possible of the real estate market’s health.
If rental properties are in high demand, their value is virtually guaranteed to be high.
High rental demand means that properties are in short supply. The law of supply and demand determines that when demand is high, and supply is low, the value of a given asset necessarily increases.
With more people looking for property, property owners have more leverage to demand the best value possible for the lease.
The metrics determining an area’s rental demand generally tend to center on residential properties. Housing is often the case in an area’s most competitive market. Although rental demand is usually focused mostly on residential properties, high rental demand can also affect real estate property values across sectors, like commercial and industrial properties.
Determining an area’s rental demand can be accomplished in several ways.
One of the most effective ways to determine rental demand is by researching the number of listings available in the area. The fewer there are, the more likely the demand in the area is high for rental properties.
The fewer there are, the faster they tell investors that the real estate market in that area is on the move.
Population Growth Indicates a Good Real Estate Investment
It makes sense that population growth would be a reliable indicator of a good real estate market; there are more people in the area, and those people will need places to live and work.
With a higher influx of people in a given area, it’s safe to say that property values will increase.
Population growth is a metric that often coincides with other metrics. People might be moving to a new place due to the increased job growth in an area. If an area is experiencing significant growth in the job market, more people will move to that area in search of jobs.
Like a positive feedback loop, the more people in an area, the more jobs will be needed to accommodate the growth. And with the growth that continues on those two metrics, it follows that real estate values would grow with them.
As a new economy of remote work begins to emerge, increasing population growth in unexpected areas can lead to extremely lucrative opportunities to get in early on the latest real estate market before they start to take off.
With more and more real estate markets drawing people for reasons outside of the conventional necessities driving property decisions, like proximity to work, investors can look at other factors that might draw the next big population boom.
Once population growth starts in an area, it’s fairly easy to recognize. For more intelligent investors, looking into the speculative factors that could drive population in the future allows even better investment opportunities.
These are just a few factors indicating that a given area is going through a hot real estate market. Let’s see how these factors and more work in practice by looking at some of the best places to invest in California for real estate.
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