The West Coast in the USA is one of the most growing markets in real estate. California rental properties are of prime importance in this real estate market. This is something that no investor, businessman, or entrepreneur would take lightly. The prices of properties are very high there, so you may need to invest large amounts to start a short-term rental business there. Therefore, you must explore everything about the California short term rental market before pulling the trigger.
You must have heard a lot about how successful a rental business could be in California. However, it never means that you start investing there without any proper information. Investing in the California market demands you to go through the rental data analysis of different places present there. Before that, you also need to explore those factors that can turn your investment in California’s real estate market into a beneficial business.
Factors Affecting the California Short Term Rental Market
Following are some of the major factors that affect the California positively and make it the best place for your investment.
High Prices of Homes
The median prices for residential properties are very high in California. Therefore, everyone could not afford his own home in California. Some of them have to live in rental homes. This will ultimately result in the rising of the California rental business. Similarly, people who come to California for work, business tours, or spending vacation also have to live in rental homes.
Lower Residential Area
This one may surprise you as California is ranked 3rd among all states of the USA on the basis of its area. However, the major part of it is covered by deserts, mountains, and hilly areas. According to a rough estimate, all the available space has already been used. So, there are fewer chances of making new homes in California. This increases the value of the California rental properties as they are in demand there.
High Construction Cost
According to the housing department of California, the state needs 180,000 houses yearly to meet the demand. However, it is impossible to do so, as there is no place for building that number of homes. Secondly, construction cost is very high as supplies are not available there, and difficult to bring them here as well. As a result, people who have to live in those 180,000 homes will automatically have to rent homes. This will make the California market the best place to invest.
Top Places to Invest in the California Market
Knowing the reasons that will make your rental business successful is not enough. You must also know a suitable place in the California market where you can invest and earn big profits. For that purpose, you need to explore some top short term rental markets in California along with their rental data. Let’s begin.
1. Los Angeles
City of Angels is one of the top cities in California to invest in short term rental business. Investing in the Los Angeles is beneficial due to the movement of a large number of people in this city for better work life.
- The median property price is $1,422,000.
- The price per square foot is slightly higher than $800.
- The occupancy rate is 73%.
- Traditional rental income in Los Angeles is $4417.
- Price to rent ratio is about 26.20%.
2. Palm Springs
Palm Springs, the city full of resorts and a luxurious environment is an important part of the California short term rental market. Affordable property rates even when they are luxury is the key thing that attracts investors to the Palm Springs.
- The average occupancy rate is 67%, which will be 87% in March.
- The average daily rate is about $500.
- The median property price is $958,898.
- The average price per square foot is not that high as it’s just $467.
- The average rental income is $3052.
- Cash on cash value is 2.71 percent.
3. San Francisco
San Francisco is one the best places to live in California. Pleasant weather, a growing economy, and specific culture are attracting people from all across the globe. All these factors are turning the San Francisco market into the most beneficial place for investment.
- The average occupancy rate is 80%.
- The average daily rate is about $240.
- The median property price is about $1,293,511.
- Price per square foot is about $1000.
- Rental demand is 76. 65% of it is for entire homes and the rest is for private rooms.
4. San Diego
With more than 70 miles of shoreline and countless natural and constructed attractions, San Diego is a tourist hub in California. Following is the rental data analysis of this city which reflects why it is at top spots in the California short term rental market.
- The median property price is about $1, 122,210.
- The average price per square foot is $806.
- The average daily rate is about $267.
- The average occupancy rate is more than 81%.
- The average rental income is $4370.
- The return on investment ratio is pretty acceptable as it’s about 2.5%.
Occupancy rate and high RIO ratio are the main reasons for investing in the San Diego.
5. Long Beach
Located on the western side of downtown Los Angeles, Long Beach is a great place to live. Long Beach is linked with both the charm and beauty of big city life and the calmness and nature of village life. Following is the analysis of the Long Beach data.
- The average occupancy rate is 80%.
- The average daily rate is $211.
- The average rental income is $1,075,000
- The median property price is $4000.
- Rental growth is 8% quarterly development.
6. Palm Desert
This city is present near Palm Springs and is home to some top golf courses in the state. Living Desert Zoo and art galleries are the main things that are raising the Palm Desert market at a quicker pace.
- The average rental growth is 27% quarterly progress.
- The average daily price is $300.
- The average occupancy rate is 70%.
- The return on investment ratio is about 2.37%.
- The median property price is $589,950.
- The average area of rental properties in Palm Desert is 1793 square feet.
7. Santa Monica
Located near Los Angeles, this city has a superb market. Amazing beaches, views over the Pacific Ocean, and amusement parks are the main things that are making the Santa Monica business grow rapidly.
- The average occupancy rate is 83%.
- The average daily rate is $259.
- RIO is 0.98%.
- The median property price is $1,929,000.
- The average rental income is $3532.
Bottom Line
Now you are ready to invest in the California short term rental market and earn big profits. You just have to find a suitable place where the median property price is low. Keep an eye on the occupancy rate and RIO ratio, as they must be higher. It’s time to make your name in California’s real estate market.
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