Reasons to Invest in the Sacramento Housing Market
There’s a lot to say about Sacramento real estate market trends based on its data, so let’s get right to it! Here are four reasons why real estate investors should invest in the city, and why Sac-Town is arguably the best place to buy investment property in California.
• Affordability Relative to California
As mentioned earlier, California has some of the most expensive house prices in the nation. The median property price in California, according to Mashvisor, is $693,843, which is roughly twice the US median. The median Sacramento investment property price, on the other hand, is $381,500. This is slightly more than the US median but it’s significantly less than the state median.
It isn’t just the Sacramento housing market that is affordable. Sacramento’s overall cost of living is also lower than those of other major California cities. For instance, Sacramento’s cost of living is 26% lower than LA’s, according to NerdWallet. It is also 65% lower than San Francisco’s, 32% lower than Oakland’s, and 26% lower than San Diego’s. Sacramento’s impressive relative affordability is a driving force for buyers and tenants and is a factor that will continue to influence the market in 2020 and beyond.
• Rental Income and Appreciation
Expensive real estate is a feature the Sacramento housing market does not have, but it still retains a beneficial facet of California real estate: its profitability. Sacramento’s traditional and Airbnb rental income averages sit at $1,554 and $2,701, respectively. These are tremendous figures, but since they are only averages, the typical Sacramento investment property will most likely generate even higher income.
If you invest in Sacramento real estate, you’ll be in for more than rental income. The Sacramento housing market is also experiencing high appreciation rates. Sacramento has been in the top 10 percent in the nation for appreciation rates during the last 10 years, according to Neighborhood Scout. During the last 12 months, Sacramento had an appreciation rate of 8.50%. The most recent quarter had a rate of 1.98%, which equates to an annual rate of 8.16%. While the Sacramento real estate market is experiencing high appreciation rates as of late, these rates are lower than 50% of cities and towns in the California real estate market. This is good news because Sacramento property prices will not become sky-high as in other California markets, while still providing real estate investors with appreciation in the short and long-term.
• Traditional Investing
Traditional real estate investing is a lucrative strategy for a Sacramento investment property. Sacramento was ranked as one of the best cities to live in, according to WalletHub. Population growth is thriving in Sacramento, as it is one of the few cities expected to have a growth rate that is twice the national rate in 2019. Demand for rental properties is a constant in Sacramento, with roughly 53 percent of residents renting out a Sacramento investment property. The Sacramento housing market also benefits from its strong economy, ranked as the 12th best in the country by Business Insider. Sacramento had a GDP growth rate of 4.0% in 2016, which was the 6th highest in the nation.
• Airbnb Investing
The Sacramento housing market also thrives from its Airbnb non-owner occupied rentals. Many tourists visit the city for its zoo, historical sites, and cultural events. But an important question about Airbnb Sacramento must be answered: is Airbnb legal in Sacramento?
Fortunately, the answer is yes. A detailed rundown of Airbnb Sacramento laws is included on Airbnb’s Help page. The most important laws include:
• Short-term rental permit: Consists of a $125 application fee. Must be renewed annually, with a $90 renewal fee
• Business license: Includes an annual business operation tax of $54
• 12% Transient Occupancy Tax
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