What are the 10 Best Places for Buying a Vacation Home in California

Looking to invest in a California vacation home? Smart move. The Golden State offers some of the country's most lucrative vacation rental markets, with properties that can generate substantial rental income year-round. In this article, I'll walk you through the 10 best places to buy a vacation home in California.

Palm Springs

Palm Springs has become a vacation rental powerhouse, and for good reason. This desert oasis attracts visitors year-round, with peak seasons during winter and spring when snowbirds flee colder climates. The median home price in Palm Springs hovers around $650,000, which is reasonable compared to many California coastal markets. The consistently high occupancy rate, which averages 65% annually, makes Palm Springs particularly attractive to vacation home investors. My clients earn between $3,000 and $5,000 monthly in rental revenue during peak seasons. Palm Springs offers visitors proximity to Joshua Tree National Park, world-class golf courses, and a rich mid-century modern architectural heritage. The city's vibrant downtown scene, with its restaurants and shops, keeps tourists returning. The Palm Springs Aerial Tramway and Coachella Valley Preserve also provide outdoor activities that appeal to nature enthusiasts. I recently spoke with Mark, a vacation home owner in Palm Springs, who purchased a three-bedroom property in 2020. He now enjoys an average daily rate of $350 and has already seen his property value increase by 18%. That kind of investment performance makes Palm Springs a standout choice.

Carmel/Monterey

The Carmel and Monterey area represents luxury coastal living at its finest. This central coast gem offers spectacular ocean views, world-renowned golf courses, and the iconic attractions of Monterey Bay Aquarium and 17-Mile Drive. Property in this region isn't cheap—median home prices start around $1.2 million. However, the rental potential matches the premium price tag. Vacation homes here command daily rates between $400 and $800, with occupancy rates around 60% annually. What sets Carmel and Monterey apart is the year-round appeal. Summer brings beachgoers, fall attracts wine enthusiasts, winter sees romantic getaways, and spring welcomes nature lovers as the hillsides bloom. The area's natural beauty and cultural richness create reliable rental demand throughout the year. My analysis shows that properties in this area typically achieve a 4-5% cap rate, which might seem modest until you factor in the consistent appreciation of real estate values in this highly desirable location. One investor I work with purchased a cottage in Carmel five years ago and has seen the property value increase by nearly 30% while enjoying steady rental income.

Venice

Venice Beach offers a unique urban coastal experience that attracts visitors seeking Los Angeles vibes without the Beverly Hills prices. This eclectic beach community is known for its bohemian atmosphere, famous boardwalk, and proximity to LAX. The median home price in Venice runs around $1.8 million, reflecting its popularity and limited housing inventory. However, vacation rentals here can command premium daily rates between $300 and $600, with occupancy rates averaging 70% throughout the year due to Los Angeles being a year-round destination. Venice vacation homes appeal to a wide range of travelers—from business professionals attending meetings in nearby Silicon Beach to tourists wanting to experience Southern California's famous beach culture. The city's walkability, combined with easy access to Santa Monica and Marina del Rey, makes it particularly attractive to those who want to avoid renting a car in LA's notorious traffic. Several clients have purchased smaller condos in Venice precisely because the return on investment often outperforms larger properties in less popular areas. One owner I advised converted a one-bedroom condo into a stylish vacation rental that now generates nearly $60,000 in annual revenue.

Lake Tahoe

Lake Tahoe stands as California's premier four-season vacation destination. This alpine paradise offers crystal-clear waters, world-class ski resorts, and outdoor activities throughout the year. South Lake Tahoe tends to be more affordable and tourist-focused, while the North Shore offers a more exclusive experience. The median home price in Lake Tahoe varies significantly by neighborhood, but generally starts around $800,000 and can easily exceed $3 million for lakefront properties. The investment potential comes from Lake Tahoe's dual peak seasons—winter for skiing and summer for lake activities- creating strong rental demand for much of the year. Vacation homes in Lake Tahoe typically see occupancy rates of 55-65% annually, with daily rates ranging from $300 to over $1,000 depending on the property's size and proximity to the lake or ski resorts. The area's natural wonders and recreational opportunities keep returning visitors, creating reliable rental income potential. The strong appreciation potential makes Lake Tahoe particularly interesting as an investment. The limited development opportunities around the lake and the growing demand for outdoor-focused vacation destinations have historically driven steady property value increases over time.

San Diego

San Diego offers California's perfect year-round climate, making it an exceptional vacation rental market. From La Jolla's beaches to Balboa Park's attractions, San Diego provides visitors with endless activities in a relaxed Southern California atmosphere. The median home price in San Diego vacation rental neighborhoods ranges from $850,000 to $1.5 million, depending on proximity to the coast. Vacation rentals here benefit from the city's reputation as a family-friendly destination with attractions like the San Diego Zoo, SeaWorld, and Legoland nearby. Occupancy rates for well-located San Diego vacation rentals average 70-75% throughout the year, with daily rates between $250 and $500. The city's convention center and military presence also create consistent demand from business travelers and military families in transition, helping to fill calendar gaps between tourist high seasons. I've helped several investors purchase vacation properties in neighborhoods like Mission Beach and Pacific Beach, where they've achieved cash-on-cash returns between 4% and 6%. One property owner specifically targets the extended-stay market for traveling nurses and military personnel during off-peak tourist seasons, maintaining impressive occupancy rates year-round.

Malibu

This exclusive coastal enclave attracts celebrities, executives, and luxury travelers seeking privacy and pristine beaches. Median home prices in Malibu start around $3 million and quickly climb into eight figures for beachfront properties. While this high entry point limits many investors, those who can afford to enter this market often see exceptional returns. Luxury vacation rentals in Malibu can command daily rates from $1,000 to $5,000, with occupancy rates averaging 50-60%. Its irreplaceable location and limited supply make Malibu special as a vacation rental investment. Simply put, they're not making any more Malibu beachfront property. The area's natural beauty and proximity to Los Angeles create a reliable stream of wealthy travelers willing to pay premium prices for the Malibu experience. One investment strategy I've seen work well in Malibu is purchasing a property slightly inland at a lower price point while still marketing the Malibu lifestyle. These properties can offer better cash flow while benefiting from the prestigious Malibu name and appreciation potential.

Laguna Beach

This Orange County gem features beautiful coves, a walkable downtown filled with galleries, and a strong community feel that keeps visitors returning year after year. The median home price in Laguna Beach runs around $2.5 million, reflecting its popularity and limited housing stock. Vacation rentals here can achieve daily rates between $350 and $800, with occupancy rates averaging 65% throughout the year. Laguna Beach benefits from its position between Los Angeles and San Diego, making it accessible to visitors from both major metropolitan areas. The town's famous art festivals during summer months create peak demand, while the pleasant year-round climate also ensures off-season rentals.

Sonoma County

Sonoma County combines vineyard views, farm-to-table dining, and a relaxed atmosphere that appeals to sophisticated travelers. The median home price in desirable areas of Sonoma County ranges from $700,000 to $1.2 million. Vacation rentals here typically see occupancy rates of 55-65%, with daily rates between $300 and $600 depending on the property's amenities and setting. Its multi-faceted appeal makes Sonoma County particularly attractive for vacation home investors. Beyond wine tasting, the region offers outdoor activities in Armstrong Redwoods State Natural Reserve, Russian River recreation, and charming towns like Healdsburg and Sonoma with their picturesque downtowns. Several investors I've worked with have purchased properties with guest houses or cottages, allowing them to live on-site part-time while renting the main house to vacationers. This strategy provides investment returns and personal enjoyment of the wine country lifestyle.

Blythe

Blythe offers an unexpected but promising vacation home opportunity in California's eastern desert. Located along the Colorado River on the California-Arizona border, this desert town provides affordable entry into the vacation rental market. The median home price in Blythe is approximately $250,000, making it the most affordable option on this list. While daily rates are more modest at $150-250, the lower investment means potentially more substantial cash-on-cash returns for investors. Blythe attracts outdoor enthusiasts interested in river activities, desert exploration, and off-road adventures. The area's proximity to Quartzsite, Arizona—home to one of the world's largest gem and mineral shows—creates seasonal rental demand spikes. Additionally, Blythe's location along I-10 is a convenient stopover for travelers between Phoenix and Los Angeles. What makes Blythe particularly interesting is its growth potential. As more popular markets become saturated and overpriced, savvy investors are turning to emerging markets like Blythe, where property values and rental demand have room to grow.

Yuba City

This growing community offers affordable vacation home opportunities with easy access to Sacramento and the Sierra Nevada mountains. The median home price in Yuba City hovers around $400,000, creating an accessible entry point for vacation home investors. Rental properties here can earn daily rates between $150 and $300, with occupancy rates improving as more travelers discover the area's appeal. Yuba City's strategic location is within driving distance of Lake Tahoe, Gold Country, and numerous outdoor recreation areas. The city offers agricultural tourism opportunities through famous orchards and annual festivals. As urban centers like San Francisco and Sacramento become increasingly expensive, Yuba City benefits from travelers seeking more affordable alternatives. Several investors I've worked with have purchased properties in Yuba City specifically for their strong positive cash flow potential. The combination of low acquisition costs and growing rental demand creates an attractive investment opportunity with room for appreciation as the region develops.

Conclusion

California offers incredible diversity for vacation home investors, from luxury coastal enclaves to affordable desert retreats. The key to success is matching your investment budget with locations that balance personal enjoyment and financial returns. Before purchasing, I recommend visiting your target location during different seasons to understand the year-round appeal. Research local vacation rental regulations carefully, as restrictions can significantly impact your investment potential. And remember that location truly is everything—properties with unique views, convenient access to attractions, or distinctive character will consistently outperform comparable homes without these features. Whether you're looking for a vacation property primarily for personal use with occasional rentals or a pure investment maximizing rental income, California has options to meet your goals. The ten locations I've outlined represent the best opportunities I've found for vacation home investments in the Golden State.