Whether you’re looking to buy your first rental property or you’re an experienced investor looking to grow by adding a new property to your portfolio, you should consider Sacramento investment properties. Sacramento is typically overshadowed by bigger cities in California like San Francisco or Los Angeles. However, when looking at the real estate market trends in Sacramento, you’ll realize there are a lot of excellent reasons to invest here. In this article, we’ll share the top reasons why we think you should invest in the Sacramento housing market 2020. We’ll also provide you with real estate data and show you the best Sacramento neighborhoods for investors to consider. Let’s get started.
#1 Affordability Relative to California
Entering the California real estate market can seem daunting, especially for a beginner real estate investor. This is mainly because California has some of the most expensive home prices in the US. According to Mashvisor’s data, the median property price in California is $716,275 – over double the US median. The capital city of Sacramento, however, is a little different. The median price of Sacramento homes is $416,133 ($267 price/square foot). This is slightly more than the US median, but still significantly less than the state median.
It isn’t just the Sacramento housing market that is affordable. The overall cost of living in this city is also lower than that of other major California cities. For example, Sacramento’s cost of living is 26% lower than Los Angeles’, 65% lower than San Francisco’s, 32% lower than Oakland’s, and 26% lower than San Diego’s according to NerdWallet. This impressive relative affordability and the fact that home values are raising make Sacramento a better choice for investors searching for good real estate deals at reasonable prices in 2020.
Check out the 10 Best Places to Invest in California in 2020.
#2 Sacramento’s Economy is Growing
Another reason to invest in Sacramento real estate is the market’s growing economy. When choosing a location for buying a rental property, investors look for established economies with good employment numbers. And when it comes to these trends, Sacramento ranks pretty high. The city and its economy are supported by a number of key industries including education, agriculture, clean technology, and healthcare. This helps Sacramento enjoy a booming job market and, as a result, the unemployment rates are constantly falling.
Furthermore, things are getting more expensive in Silicon Valley and the Bay area. In turn, this is driving a lot of people and companies to nearby markets like Sacramento. Meaning, the economy continues to grow as the city is attracting new industries and companies that are creating an influx of new job opportunities that pay well. Add that to Sacramento’s already established economy and you’ll quickly see that it’s a thriving economy in 2020. For Sacramento real estate investors, this means strong demand for rental properties in the Sacramento housing market.
#3 Population Growth & Strong Tenant Pool
As mentioned, with a strong economy comes a strong demand for rental properties. This is what we’re seeing in the Sacramento real estate market 2020. As many people are moving to the city for work, landlords in Sacramento will enjoy a pool of qualified tenants who are paid well and are looking for long term rentals. Indeed, the population growth is thriving here as the city was ranked as one of the best cities to live in according to WalletHub. As demand for rentals increased, the Sacramento rental vacancy rate fell to just 2.88% (much lower than the 6.6% national average). This translates into lucrative traditional rental properties in Sacramento.
Related: 20 Most Profitable Locations for Traditional Rentals in 2020
The demand for Sacramento rental properties in constant as roughly 53% of residents in the city are renters. Moreover, home sales volume in Sacramento remained essentially flat in 2018-2019. Sacramento housing market forecast suggests this will be the case for 2020 as well seeing as the homeownership rate is unstable and below peak level which was 67% in 2005. For landlords, this contributes to the occupancy rate, retention rate, and increases your return on investment. Good tenants are not always easy to find, but there are a lot of them in Sacramento and they’re likely to pay rent on time, renew their leases, and take good care of your rental property.
#4 Rental Income and Appreciation
Due to the high rental demand, Sacramento real estate investors will also benefit from rising rents and enjoy a good monthly rental income. The traditional rental income in Sacramento is $1,676 according to Mashvisor’s real estate data. However, this is just the average for the market. You’ve got the chance to find Sacramento houses for sale with higher rental income potential depending on the property type and neighborhood you’re investing in. For example, a single-family home rental in Sacramento can make $1,718 in monthly rental income, but a multi-family property can make $2,033.
Another reason to invest in Sacramento real estate is high appreciation rates the market enjoys. Over the past 10 years, Sacramento has been in the top 10% for appreciation in the nation. When you combine all the Sacramento housing market trends (relative affordability, rent growth, and high appreciation) and crunch the numbers, you’ll notice that you have an attractive potential for ROI here. You can buy an investment property that will appreciate quickly and, as tenants pay for your expenses, you can enjoy positive cash flow and nice profits.
What About Airbnb Sacramento?
Airbnb has become a huge player in the real estate industry. But if you’re interested in investing in Airbnb Sacramento, one important question to ask is: is Airbnb legal in Sacramento? Luckily, the answer is yes. As a matter of fact, the Sacramento housing market thrives from its Airbnb non-owner occupied rentals as tourists visit the city for its zoo, historical sites, and cultural events. According to Mashvisor’s short-term rental data, Sacramento Airbnb hosts charge an average daily rate of $120, have an Airbnb occupancy rate of 67%, and generate a monthly Airbnb rental income of $2,955.
Related: A Glimpse of Mashvisor’s Short Term Rental Data
Still, there are some Airbnb regulations that you should know before investing in Airbnb Sacramento. First off, all operators of vacation rentals (stays of 30 days or less) must obtain either a short-term rental permit or a conditional use permit from Community Development. Operators from their primary residence need to obtain a short-term rental permit, pay a $50 annual business tax, and collect and remit transient occupancy tax of 12% from renters. A vacation rental may also operate from a secondary or a non-owner occupied residence for a total of 90 days in a calendar year. Sacramento Airbnb laws in this case include obtaining a conditional use permit as well as paying annual business tax and transient occupancy tax.
Where to Invest in Sacramento Housing Market 2020
Now you understand why the Sacramento housing market makes for a good location for investing in real estate in 2020. However, you’re probably still wondering where to buy rental property in Sacramento. To find the best Sacramento neighborhoods, investors need to run a neighborhood analysis to find the real estate investment performance of different neighborhoods and, thus, pick the top one or the one that meets their personal criteria. We know that this process might take time, so don’t worry – Mashvisor’s got you covered.
Using the Real Estate Heatmap, we did the analysis for you and came up with this list of the 5 best neighborhoods in Sacramento for investing in traditional rentals and the best neighborhoods for investing in Airbnb rental properties. These are locations that Sacramento real estate investors should focus on during their search for profitable Sacramento investment properties for sale. To learn more about how we’ll help you make smarter real estate investment decisions, click here.
Best Neighborhoods in Sacramento for Traditional Rentals
#1 Wills Acres
- Median Property Price: $236,500
- Price/Square Foot: $211
- Price to Rent Ratio: 9
- Traditional Rental Income: $2,110
- Traditional Cash on Cash Return: 6%
#2 South City Farms
- Median Property Price: $217,805
- Price/Square Foot: $252
- Traditional Rental Income: $1,680
- Price to Rent Ratio: 11
- Traditional Cash on Cash Return: 3%
#3 Southeast Village
- Median Property Price: $258,981
- Price/Square Foot: $278
- Traditional Rental Income: $1,695
- Price to Rent Ratio: 13
- Traditional Cash on Cash Return: 3%
#4 Avondale
- Median Property Price: $251,381
- Price/Square Foot: $209
- Traditional Rental Income: $1,550
- Price to Rent Ratio: 14
- Traditional Cash on Cash Return: 2.5%
#5 Lawrence Park
- Median Property Price: $291,025
- Price/Square Foot: $187
- Traditional Rental Income: $1,600
- Price to Rent Ratio: 15
- Traditional Cash on Cash Return: 2%
To start looking for and analyzing the best investment properties in your neighborhood of choice in the Sacramento housing market, click here.
Best Neighborhoods in Sacramento for Airbnb Rentals
#1 Natomas Corporate Center
- Median Property Price: $228,000
- Price/Square Foot: $223
- Average Airbnb Daily Rate: $127
- Monthly Airbnb Rental Income: $3,182
- Airbnb Occupancy Rate: 71%
- Airbnb Cash on Cash Return: 7.4%
#2 Lawrence Park
- Median Property Price: $291,025
- Price/Square Foot: $187
- Average Airbnb Daily Rate: $91
- Monthly Airbnb Rental Income: $2,699
- Airbnb Occupancy Rate: 68%
- Airbnb Cash on Cash Return: 7%
#3 Metro Center
- Median Property Price: $355,999
- Price/Square Foot: $234
- Average Airbnb Daily Rate: $154
- Monthly Airbnb Rental Income: $4,169
- Airbnb Occupancy Rate: 82%
- Airbnb Cash on Cash Return: 6.4%
#4 Marshall School
- Median Property Price: $625,000
- Price/Square Foot: $324
- Average Airbnb Daily Rate: $112
- Monthly Airbnb Rental Income: $6,767
- Airbnb Occupancy Rate: 68%
- Airbnb Cash on Cash Return: 6.3%
#5 Southeast Village
- Median Property Price: $258,981
- Price/Square Foot: $278
- Average Airbnb Daily Rate: $126
- Monthly Airbnb Rental Income: $3,155
- Airbnb Occupancy Rate: 62%
- Airbnb Cash on Cash Return: 6%
Do you have a free Mashvisor account? Use our Property Finder to find lucrative Sacramento real estate investment properties that match your criteria in a matter of minutes!
The Bottom Line
Is Sacramento a good place to invest in real estate? Based on all the real estate market trends and data we’ve covered in this article, there’s no doubt that the answer is yes. So if you want to buy income properties in a growing and profitable market, the Sacramento housing market 2020 is an attractive place to consider. With Mashvisor’s tools in hand, you can start and finish your search for the best Sacramento real estate investment and analyze your potential ROI in just 15 minutes. What are you waiting for? Start out your 7-day free trial with Mashvisor now.