Best Cities in California for Multi-Family Real Estate Investment in 2025

September 11, 2025 Investment , , , ,

Why Multi-Family Real Estate Is Booming in California 2025

California remains one of the most dynamic real estate markets in the U.S. Despite challenges like rising construction costs and strict housing regulations, multi-family real estate is thriving in 2025. The reasons are clear: strong job growth, consistent population inflows, a persistent housing shortage, and increasing demand for rental units.

According to the U.S. Census Bureau, California added nearly 200,000 new residents in 2024, much of it driven by migration into suburban and secondary markets. At the same time, a report from CBRE (2025 Outlook) notes that rental demand remains strong as affordability issues keep many Californians out of the homeownership market.

For investors, this means a ripe opportunity to tap into cities where rental demand, job creation, and affordability converge.

Key Factors to Consider Before Investing in California Multi-Family Properties

Before diving into the best cities, investors should evaluate:

  1. Rental Demand – Are young professionals, families, or students driving occupancy?
  2. Cap Rates & Returns – How do yields compare between primary markets (like LA) and secondary ones (like Sacramento or Fresno)?
  3. Affordability – Lower property prices in secondary markets can translate to higher rental yields.
  4. Job Market & Population Growth – Cities with expanding industries (tech in San Jose, healthcare in Fresno) sustain long-term rental demand.
  5. Regulatory Climate – Rent control and zoning laws vary widely across California.

Best Cities in California for Multi-Family Real Estate Investment in 2025

1. Los Angeles

  • Why it stands out: With over 3.8 million residents, LA remains the largest rental market in California. The Los Angeles Economic Development Corporation projects 2% job growth in 2025, led by entertainment, healthcare, and logistics.
  • Opportunity: High demand in core neighbourhoods like Downtown LA, Koreatown, and Hollywood. However, strict rent control and high entry costs limit cap rates (averaging 4.2%).
  • Takeaway: Best for long-term appreciation and stable cash flow.

2. San Diego

  • Why it stands out: A strong military presence, biotech industry growth, and steady population increase (1.3% in 2024 per Census estimates).
  • Opportunity: High rental demand in neighbourhoods near UC San Diego and Mission Valley. Cap rates are slightly higher than LA (around 4.8%).
  • Takeaway: Ideal for investors balancing appreciation with healthy rental income.

3. San Jose (Silicon Valley)

  • Why it stands out: Tech remains the backbone. Companies like Google and Apple continue expanding offices in the region, driving housing demand.
  • Opportunity: Median rents remain among the highest in California, averaging $3,000+ for a 2-bedroom (Zillow Rental Report, 2025).
  • Takeaway: Best for investors seeking premium rental rates and exposure to high-income tenants.

4. Sacramento

  • Why it stands out: Sacramento has become a migration hub for those priced out of the Bay Area. Population grew 1.7% in 2024, higher than the state average.
  • Opportunity: Multi-family properties are significantly more affordable (median property values ~40% lower than San Jose).
  • Takeaway: Offers higher yields (cap rates 5.5%+) and strong rental absorption.

5. Fresno

  • Why it stands out: A rising secondary market with affordability and job growth in healthcare, agriculture, and logistics.
  • Opportunity: Rental occupancy rates remain above 95%, with average rents growing 6% in 2024 (Yardi Matrix).
  • Takeaway: Attractive for investors seeking entry-level prices and strong rental yields.

6. Oakland

  • Why it stands out: Proximity to San Francisco while offering more affordable rents attracts both renters and investors.
  • Opportunity: Rental demand driven by tech spillover and cultural vibrancy. However, investors must navigate stricter rent control.
  • Takeaway: Strong demand but regulatory hurdles make due diligence critical.

Emerging Secondary Markets Worth Watching

  • Riverside & Inland Empire – Affordable housing compared to LA, with logistics and warehousing jobs fueling growth.
  • Bakersfield – Affordable entry point with rising demand from energy and agriculture industries.
  • Santa Rosa – Limited housing supply and strong demand in wine country markets.

These secondary markets often deliver higher cap rates and faster rental growth compared to saturated coastal metros.

Risks & Challenges in California’s Multi-Family Market

  1. Rent Control Regulations – Cities like LA and Oakland impose strict limits on rental increases.
  2. High Entry Costs – Prime markets like San Jose and LA require significant capital.
  3. Economic Shifts – Tech layoffs or industry downturns can soften rental demand in certain regions.
  4. Natural Disasters – Wildfires and seismic risks increase insurance and maintenance costs.

Conclusion: Strategic Takeaways for Investors in 2025

California remains one of the strongest multi-family real estate markets in the U.S., but success depends on choosing the right city:

  • For long-term appreciation: Los Angeles and San Jose.
  • For higher yields and affordability: Sacramento, Fresno, and Riverside.
  • For balanced risk-reward: San Diego and Oakland.

Actionable Insight: Investors seeking higher rental yields in 2025 should consider Sacramento or Fresno, while those prioritizing long-term value appreciation may lean toward Los Angeles or San Jose.

By aligning investment strategy with market trendsrental demand, affordability, and job growth investors can maximize returns in California’s competitive multi-family sector.