There’s never been a better time to be an investor in the Sacramento real estate market than now.
And we know you’re raring to read all the details about what makes it the perfect destination.
Before we get right into it, there’s a couple of specific things you should know about Sacramento in specific and the California real estate market in general.
Overview of the Sacramento Real Estate Market
The capital of California, Sacramento, is home to about half a million residents. But certain suburbs like Roseville, Yuba City, Truckee, and South Lake Tahoe are often considered part of Sacramento. This way, you’re looking at a real estate market of about two million people.
However, even if we were only considering the Sacramento population of 500,000 people, history has taught us that population size isn’t all to consider when looking for the best location a profitable investment property. And Sacramento is one of those, as it has traditionally offered a good return on investment for real estate investors.
In terms of rental property type choices, you will ideally find more single-family homes on the Sacramento real estate market, all of which account for about 60% of the housing units. But there are other kinds of rental properties you can find on the market, including rowhouses, duplexes, and homes that have been transformed into apartments.
“Will the housing market crash?” was probably one of the most asked questions in real estate as the Coronavirus took over. The Sacramento real estate market condition wasn’t all that stable either. For instance, home sales prices dropped from April to May 2020 by 40% compared to the previous year. According to Sacrealtor.org, April’s numbers alone went down by 13.4%.
But things are starting to switch up for good this year. According to the California Association of Realtors, the prices of single-family homes in Sacramento increased by 21.3% in January 2021. And the Sacramento real estate market forecast by local realtors predicts a 17.2% increase in home sales this year.
Here are some of the general trends we’ve discovered on the Sacramento real estate market based on Mashvisor’s data:
Sacramento, CA Real Estate Market 2021 Latest Trends
Pricing
- Median Property Price: $431,857
- Price per Square Foot: $301
- For Sale Listings: 84
While the median property price in the Sacramento real estate market is higher than the national average, it is still relatively more affordable to buy a house here than in other best places to invest in real estate in 2021.
Traditional Rental Properties
- Traditional Rental Income: $1,542
- Traditional Cash on Cash Return: 1.93%
- Price to Rent Ratio: 23
The ideal cash on cash return is around the 8 -12% range, but the number here is just the city level, and – generally – investors are still able to find very good investment opportunities in Sacramento.
Airbnb Rental Properties
- Airbnb Rental Income: $3,112
- Airbnb Cash on Cash Return: 4.26%
- Airbnb Occupancy Rate: 75%
Airbnb rentals tend to perform better than traditional rentals in the Sacramento real estate market. The main reason for this is the presence of tourist attractions, making it a great location for travelers. If you were wondering which kind of rental properties to invest in, you may want to consider an Airbnb strategy.
Read more: How to Earn Positive Cash Flow With the Airbnb Strategy
Why the Sacramento California Real Estate Market Is Great for Investment
At the end of the day, your mission as a real estate investor is simple — to get the best properties with the best profitability, while also doing your due diligence. When it comes to Sacramento, we’ve got you covered on that end. Here are some of the reasons why investing in the Sacramento real estate market is a good decision in 2021.
The Migration from the Bay Area to Sacramento Is on the Rise
In the thick of the pandemic, residents from San Francisco began to move to Sacramento in their numbers. According to CBRE, San Francisco to Sacramento migration increased by 70% in 2020 alone. This made California’s capital the metro with the highest migration turnaround per capita, effectively leading other big metros like Detroit, St. Louis, and Baltimore.
For Sacramento income property investors, this is music to the ears. Because despite the increase in rent prices, people continue to flock in and are ready to pay. As a result, Sacramento County is one of the most competitive housing markets in the US right now.
Sacramento’s Multifamily Market Is Getting Stronger
Along with the Inland Empire part of Southern California, Sacramento’s multifamily market is experiencing a smooth bounce-back from COVID-19. Multifamily rents in Sacramento have gone up by 6.4% this year.
Also, according to Yardi Matrix, the Sacramento real estate market has grown by 1.2%, placing it in the top three markets for occupancy growth.
You’ll Be Investing in a Landlord-Friendly Housing Market
As a real estate investor, one of the best deals you can get is putting your money in locations where the laws favor you as a landlord. Now, the income on Sacramento rental properties isn’t as high as in places like San Francisco, but it makes up for that through some of its regulations, such as the lack of burden of local rent control laws.
This is not to say that Sacramento’s rental income isn’t good. Far from it. In 2020, based on Mashvisor’s real estate data, the average rental income for traditional rentals was $1,534. In 2021, it has already increased to $1,542.
The city is also landlord-friendly because of the cost of living. More people are looking for houses for rent in Sacramento because it is cheaper to live there. Especially when compared to other some major cities as detailed below:
- 73% cheaper than San Francisco
- 28% cheaper than Orange County
- 26% cheaper than Los Angeles (Long Beach)
- 21% cheaper than San Diego
There Are Great Attractions for Tourists
It may not be the first place that comes to mind when thinking of great tourist locations to visit in the US, but Sacramento is actually one of the more suitable tourist destinations for people of all ages. Sacramento also has a calendar filled with cultural events like the Sacramento Music Festival and specific tourist locations like Fairytale Town and Crocker Art Museum, the first public art museum.
All of this has contributed to the investors earning more profit from investing in vacation rentals like Airbnb than traditional rentals. According to Airbnb data from Mashvisor, Airbnb rentals in Sacramento offer about 3 times the rental income of traditional rentals.
Sacramento Has a Diverse Job and Rental Market
The job market in Sacramento has seen a steady increase over the past few years, despite the obvious decline in the early 2000s. It is expected to see future job growth of 34.8%, which is 1.3% higher than the expected US average.
Being the capital of California, many jobs in Sacramento are in the government, which is the largest employer in the local economy. However, there are employment opportunities in other sectors like healthcare and construction. Some tech firms also prefer to do business in the area due to the lower cost of living.
The Sacramento housing market is also diverse, making it a good attraction for lots of people. For instance, there are universities around that can be leveraged, including the University of California and the American River College. If you’re thinking of investing in properties fit for students, you may want to look at Sacramento homes for sale.
Best Sacramento Neighborhoods for Traditional Rentals
Now that we know why Sacramento is such a good market for investing in real estate, let’s take a look at the best areas to buy a long-term rental property. The data below is provided by Mashvisor’s investment property calculator and reflects the performance of actual rental comps in the local market. If you prefer to invest in traditional rental properties, these places are your best bet in Sacramento:
1. Northgate
- Median Property Price: $346,950
- Price per Square Foot: $331
- Monthly Traditional Rental Income: $1,720
- Average Traditional Cash on Cash Return: 5.22%
2. Robla
- Median Property Price: $335,000
- Price per Square Foot: $292
- Monthly Traditional Rental Income: $1,437
- Average Traditional Cash on Cash Return: 3.99%
3. Del Paso Park
- Median Property Price: $419,000
- Price per Square Foot: $299
- Monthly Traditional Rental Income: $1,456
- Average Traditional Cash on Cash Return: 3.20%
4. Campus Commons
- Median Property Price: $367,500
- Price per Square Foot: $264
- Monthly Traditional Rental Income: $1,484
- Average Traditional Cash on Cash Return: 3.13%
5. Valley High-North Laguna
- Median Property Price: $350,000
- Price per Square Foot: $254
- Monthly Traditional Rental Income: $1,010
- Average Traditional Cash on Cash Return: 2.34%
Best Neighborhoods in Sacramento for Airbnb Rentals
Airbnb rentals in the Sacramento real estate market generate higher returns.
We already know that an Airbnb strategy is better than traditional rentals in the Sacramento real estate market. But what are the best places to invest in the area? Mashvisor’s investment property calculator has all the answers:
1. Valley High-North Laguna
- Median Property Price: $350,000
- Price per Square Foot: $254
- Monthly Airbnb Rental Income: $3,745
- Airbnb Cash on Cash Return: 10.00%
- Average Airbnb Occupancy Rate: 64%
2. Natomas Crossing
- Median Property Price: $320,000
- Price per Square Foot: $194
- Monthly Airbnb Rental Income: $3,824
- Airbnb Cash on Cash Return: 9.72%
- Average Airbnb Occupancy Rate: 78%
3. Creekside
- Median Property Price: $469,999
- Price per Square Foot: $286
- Monthly Airbnb Rental Income: $2,701
- Airbnb Cash on Cash Return: 9.52%
- Average Airbnb Occupancy Rate: 63%
4. Natomas Creek
- Median Property Price: $440,000
- Price per Square Foot: $238
- Monthly Airbnb Rental Income: $2,813
- Airbnb Cash on Cash Return: 7.70%
- Average Airbnb Occupancy Rate: 60%
5. South Oak Park
- Median Property Price: $254,850
- Price per Square Foot: $337
- Monthly Airbnb Rental Income: $2,582
- Airbnb Cash on Cash Return: 6.75%
- Average Airbnb Occupancy Rate: 74%
Read more: Should I Buy A Vacation Home In Sacramento, CA?
What Are the Airbnb Laws in Sacramento?
Although Airbnb rentals are legal in Sacramento, there are laws guiding hosts, like most states in the United States. The city’s short-term ordinance requires hosts to obtain a short-term rental permit which allows them to use their homes as primary and secondary residences for 30-day stays or less.
The permit is renewed annually and goes for $160. However, worthy of note is the fact that you can lease an Airbnb rental for more than 30 days if it is your residence. That is, the host lives in the home for at least 184 days during the year. If you plan to live in the rental property, you may be able to earn more money investing in Airbnb Sacramento.
Find the Best Investment Property in Sacramento Real Estate Market
Like we mentioned earlier, the Sacramento real estate market is a pretty competitive one. So, you have to be meticulous in finding the best deals. For this, Mashvisor is the most comprehensive investment tool for searching for and analyzing the profitability potential of a Sacramento investment property.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.