Best Places to Invest in Real Estate in California for Top ROI

A hand went up at the seminar.

“I don’t have any experience. How can I start investing in California real estate?”

“Well, not like me,” I joked. “The California real estate market is unique. First, you need to do your research. Then, you need to decide where you want to invest.”

I started my career in Texas real estate. When I came to California, I thought it couldn’t be that different. After all, Dallas was (and still is) a great real estate market with a lot of value.

But I couldn’t even fathom just how fast or competitive the California market was. For years, I struggled to even break-in.

Years later, I know what I should have done. Here’s everything I’ve learned about the best places to invest in real estate in California.

California’s Current Housing Market

California’s economy is booming—and a booming economy means a strong housing market. Even better, California’s real estate is diverse. There are cities with starter homes. There are cities with multi-million dollar mansions.

Which one do you want to invest in?

Part of my problem when approaching the California real estate market was that I didn’t make this critical decision up front. I bounced from market to market, never really gaining a foothold.

I needed to figure out where to invest first. Once I did, the rest followed.

Why You Should Invest in California Real Estate

There are a number of reasons to invest in California real estate. The state has a strong economy and, historically, an incredibly strong real estate market. The communities and regions of California are diverse and offer a little something for every type of investor.

While other things may be uncertain, California is likely to always be a desirable place to live. There will always be people who want to purchase or rent a home in California, regardless of how expensive the real estate becomes.

But there are challenges, too. And that’s one reason why it’s so critical to find the best place for your investment. California has high property values, which means a lot of money is on the line. California is also (as mentioned) incredibly competitive, so it will take time and energy to gain a foothold in each market.

The Best Places to Invest in Real Estate in California

So, where should you invest in California real estate? You have a lot of options, and your choice will largely depend on the type of investments you want to make and where you currently are in your investment career.

Ask yourself the following questions:

  • How much do I want to invest?
  • Do I want to flip, rent, or wholesale?
  • How will I find leads?

 

The best place for a short-term flip isn’t necessarily the best place for a long-term rental. If you want to wholesale houses, you need an area with a lot of churn. If you want short-term rentals, you need to work somewhere that attracts many visitors.

With that in mind, let’s take a look at a few of the most popular regions for investing in California.

The Bay Area

San Francisco is one of the most popular places to invest in real estate due to its strong economy and high property values. Unfortunately, it can also be a double-edged sword. The city has a number of restrictions on development, which can make it challenging to find properties to invest in. The market tends to be extremely competitive as well.

  • One of the most expensive cities to invest in in the United States—which can potentially impact ROI.
  • San Francisco specifically has a property tax rate that’s historically much lower than the national average, making it a great choice for those who are holding long-term.
  • There’s a significantly higher-than-average proportion of renters in the Bay Area, which can impact the real estate market.

Southern California

Los Angeles is another great option for investors and house-flippers. The city has a large, diverse population, a strong economy, and people constantly moving in and out. However, the cost of living is high and there is a lot of competition for investment properties.

San Diego is another popular destination for real estate investors. The city has a moderate cost of living and a strong economy. It is also a desirable place to live, which can make properties easier to rent or sell.

Irvine is a popular city with the tech community. But it can be hard to break into this market because the property values are so high; many properties are valued at over a million.

  • Higher purchase prices in Southern California mean you need to bring more cash to the table.
  • Southern California experiences a lot of churn; many people move in for opportunities while a lot of people leave for affordability reasons.
  • Southern California holds a diverse set of investments; you can find dramatically different neighborhoods throughout the region.

Central California

The Central Valley is one of the most affordable places to invest in real estate in California. The area has a growing economy and is attracting more people to live and work in the region. Fresno CA, for instance, is a great place to flip—but it’s still a hot market and extremely competitive.

  • The Central Valley currently sees a lot of interest from those moving out of the more expensive areas of California.
  • Some areas of the Central Valley are very expensive and competitive in their own right, but those high property values could potentially yield great results.
  • There are still some affordable housing stocks within Central Valley, more so than in some of the surrounding areas.

Northwest California

Wine Country is a great place to invest in real estate. The cost of living here is relatively low (emphasis on relatively) and there are opportunities for both short and long-term investments. And, of course, there are those lovely coastal properties.

  • Available properties aren’t as expensive as the nearby Bay Area, although they are getting up there.
  • The housing markets in areas such as Napa are extremely competitive, however. Anywhere near the coast will be expensive.
  • Historically, sales prices within Northwest California have performed strongly.

Far North California

The “Far North” of California is a vast and varied region. There are a number of different markets within it, each with its own unique characteristics. Eureka, for instance, has a strong economy and a relatively low cost of living. In general, properties in Far North California are cheaper than in the southern part of the state. However, there are still a number of expensive markets—particularly near the coast.

  • Far North California has greater levels of affordability than the southern portion of the state.
  • However, because these are coastal properties, they are still considered luxury properties and high-value towns.
  • Far North cities may be good options for investors who have limited starting cash.

The real estate market in California is extremely diverse. There are a number of different factors that you need to consider before making an investment. But if you do your homework and know what you’re looking for, you can find a great property to invest in.

How to Find Leads in the California Real Estate Market

Knowing where to find the best places to invest in real estate in California is only half the battle. You also need to know how to find leads.

Once a house hits the market in California, it’s already too late. As an investor, you need to find houses with motivated sellers.

Let’s take a look at some of the most popular methods for doing so.

Distressed Property Listings

There are a number of websites that list distressed properties, such as foreclosures, short sales, and houses in pre-foreclosure. These can be great leads—but they’re also very competitive.

You’ll need to act fast and have your financing in order before you make an offer. And in a hot market like California, there will be a lot of other investors making competing bids. If you can see that a property is distressed, so can they.

Auctions

Auctions are another great way to find California real estate, but you need to be particularly brave here. You have to pay in cash, usually within just a few days of the auction ending (sometimes on the same day). These properties are sold as-is, which means you’ll need to factor in extensive repairs and renovations. Often, you won’t even be able to tour or inspect the property before bidding on it, which means you could be purchasing a money pit.

Direct Mail Campaigns

Direct mail campaigns are the avenue that most investors are familiar with. While they can be an effective way to find motivated sellers, you need to compile (or purchase) a list of leads and spend a lot of money on printing and mailing. The advantage, of course, is that you can target specific neighborhoods. Unfortunately, this approach usually isn’t very effective. Most of the people you reach will have no real interest in selling their houses.

Expired Real Estate Listings

Expired real estate listings can be a great lead source, but they’re also stale. After all, the reason these listings expired is because the houses didn’t sell. In some cases, you might be able to work with the former agent to get more information about what happened and why the listing failed. But in others, you’ll be completely in the dark. Usually, the house either needed tremendous repairs or was completely overpriced.

Cold Calling

For a lot of investors, there’s nothing more discouraging than cold calling. While cold calling is one of the oldest forms of lead generation, it doesn’t yield results very frequently anymore. How effective cold calling is really depends on the quality of your lists. If you purchase lists, it’s very likely that others have, too.

Properties That Didn’t Appear on the MLS

There are a number of properties that never appear on the MLS, such as those that are sold via For Sale By Owner (FSBO) or off-market listings. You can find these leads by driving around neighborhoods, searching online classifieds, or even looking at Facebook and Zillow. Of course, the problem is the same: Other people can also see these properties pop up on the market.

Networking

There are already a ton of investors in the California real estate market, so how can you get an edge on the competition?

The answer is simple: by networking.

You need to get connected with as many people as possible, such as other investors, real estate agents, and even potential sellers. By building up a network of contacts, you’ll be able to hear about deals before they hit the market. You might even be able to get in on a deal that no one else could.

That being said, it can take years, even decades, to really start building up your network in such a hot market. But there’s good news.

Find the Help You Need with HomeVestors®

I admit that I didn’t want to spend all my time working or chasing down leads in California. And finding the best places to invest in real estate in California was an admittedly daunting task. All I wanted was a system that did the heavy lifting for me while I focused on other important tasks. That’s why becoming a HomeVestors® franchise owner was one of the best professional decisions I’ve ever made.

HomeVestors is a nationally-recognized franchise network of real estate investors. When you work with HomeVestors and its proprietary software, the leads come straight to you—you don’t need to do anything but wait. And in a hot property market like California, that can make all the difference.

Let’s Begin

It’s time to get serious about your real estate business. If you want to learn more about the best places to invest in real estate in California, contact HomeVestors and request more information on franchise opportunities.