California is the most populous state in the nation, has the highest gross domestic product and covers more area than any other in the lower 48 states other than Texas. As such, the state of California has a vibrant and remarkably diverse real estate market. In fact, the National Association of Realtors Realtor Magazine just forecast the biggest home price increase (5 to 7 percent) in the state of California. For investment property, the potential profits will be even greater. Below are the key areas that will drive that increase:

One of the best ways to take advantage of the recovering California real estate market is to invest in rehab properties. You can still buy these properties cheaply, do some work to put them into turnkey condition, then profit from selling them to a different class of buyer. Furthermore, thanks to the ready availability of private money lenders, you can do your rehabs with borrowed money, making your potential returns even higher.