Skip to content
Short-Term & Vacation Rental Discussions

User Stats

394
Posts
319
Votes
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
319
Votes |
394
Posts

STR in Sacramento

Noah Laker
  • Real Estate Broker
  • Sacramento, CA
Posted Mar 17 2024, 23:46

I'm a broker here in Sacramento, own some properties, and through our sister company we manage over 100 STR properties. We have portfolios in NorCal, SoCal, and Arizona.

I made this observation last year that the "vacation markets" such as Scottsdale, AZ took a dive when economic activity slowed down (and COVID money dried up). We saw the same thing across the country in the quintessential vacation markets like Florida and Tennessee. 

However, Sacramento has been remarkably stable. 

Does anyone else have properties in multiple markets? Are you seeing the same thing? My theory is that, because Sacramento is a state capital and a business hub, travelers come here based on necessity. This is in contrast to vacation markets, which rely on travelers spending discretionally. 

I have a few hundred K liquid right now and I'm leaning towards doubling down on Sacramento real estate instead of diversifying to other markets, at least for the time being. Two years ago, my team and I were looking at other markets, but I paused that plan to see where things went, and I'm glad that I did. Pardon me for the long rant, just wanted to throw this out there and see if it resonates or if I'm missing anything. 

User Stats

11,649
Posts
13,805
Votes
John Underwood
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
13,805
Votes |
11,649
Posts
John Underwood
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Investor
  • Greer, SC
Replied Mar 18 2024, 05:10

Is Sacramento STR friendly?

I own in multiple markets. We are still doing very well in the vacation market of Pigeon Forge. Strongly enough our Lake House in SC is very slow right now. I expect that to change or at least I'll have more time at the lake this year. 

User Stats

7,176
Posts
5,669
Votes
Michael Baum
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Olympia, WA
5,669
Votes |
7,176
Posts
Michael Baum
Pro Member
#1 Short-Term & Vacation Rental Discussions Contributor
  • Olympia, WA
Replied Mar 18 2024, 12:51

Single market guy here. Our lakehouse is a bit slow in getting booked, but we are about 70% full right now so I expect the rest to fill in over the next couple of months.

Ya know @Noah Laker, if the Sacramento market is working well for you, just stay there. Geographic diversification is a good thing, but if you can do well by picking up a couple more properties nearby, then that should be the plan!

BiggerPockets logo
Find, Vet and Invest in Syndications
|
BiggerPockets
PassivePockets will help you find sponsors, evaluate deals, and learn how to invest with confidence.

User Stats

10
Posts
8
Votes
Simon Lee
  • Investor
  • Sonoma County
8
Votes |
10
Posts
Simon Lee
  • Investor
  • Sonoma County
Replied Mar 18 2024, 14:16

I just looked up the Sacramento STR laws and it appears to be accessory use only, meaning you can rent out a room (house hack) or ADU, but you must be a primary resident of the property and prove it. That's a bummer. I have family in Sacramento and Roseville and was hoping to deploy some capital there.

*The short-term rental must remain an accessory use to your full-time occupancy.

Under no circumstance shall the short-term rental services become the primary use of the property.*

User Stats

163
Posts
204
Votes
Chris Watson
  • Investor
  • Florida
204
Votes |
163
Posts
Chris Watson
  • Investor
  • Florida
Replied Mar 20 2024, 06:20

There are a couple factors at play and each play a role:

1. COVID cash is gone. While this plays a role it really dried up at the consumer level about 1.5 yrs ago so this is a less of a factor for 2024. The COVID cash girlfriend left us over a year ago and she is not coming back so we need to suck it up and move on.

2. Inflation is worse than the govt portrays it and higher interest rates are bleeding away the money people spend on vacation. Remember alot of Americans have a large amount on credit cards and they have seen thier rates go from 8-12% to 12%-19%.  That is bleeding the consumer by several hundreds a month.

3. Layoffs and business closures are being kept out of the news. Monthly New Job market numbers are initially released high and revised down a few months later to camouflage the issue. Less money for non-essentials like vacations.

4. Most STR owners joined the game during/since COVID and does not know what normal looks like causing newer owners to panic and drop rates to rock bottom (4 bedrooms with indoor pools during spring break art $229 a night when the Holiday Inn Express is $249 a night). Fear based management.

5. Consumer confidence is down which means they do not trust splurging today for the fear of the unknown tomorrow. In the markets I am in we are seeing more last minute (within 14 days) bookings.

6. If your target demographic (upper middle class/upper class/government workers) for your STRs are less impacted by these factors then that market will produce a better return now.

7. We are still seeing people travel overseas and cruise more this year since they couldn't during COVID.  Airlines and cruise ships are having another gang buster year.

8. While not being political or partisan the leadership of the nation not being strong and reassuring produces fear in the consumers.  While they try to dress it up by trying to reassure the consumer, the fact is people are afraid. It is like the husband who beats you and then says I love you, it causes fear and confusion. They don't trust and therefore expect the worst.

Now when people are afraid it is the time to buy if they begin to fire sale (seeing this starting to trickling in) BUT make sure you keep your cash reserves to keep you buckled to your seat as we might experience more turbulence on this STR ride.

User Stats

394
Posts
319
Votes
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
319
Votes |
394
Posts
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
Replied Mar 21 2024, 15:05
Quote from @John Underwood:

Is Sacramento STR friendly?

I own in multiple markets. We are still doing very well in the vacation market of Pigeon Forge. Strongly enough our Lake House in SC is very slow right now. I expect that to change or at least I'll have more time at the lake this year. 


 Compared to other major California cities, Sacramento is by far the friendliest, in my humble opinion. 

User Stats

394
Posts
319
Votes
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
319
Votes |
394
Posts
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
Replied Mar 21 2024, 15:05
Quote from @Simon Lee:

I just looked up the Sacramento STR laws and it appears to be accessory use only, meaning you can rent out a room (house hack) or ADU, but you must be a primary resident of the property and prove it. That's a bummer. I have family in Sacramento and Roseville and was hoping to deploy some capital there.

*The short-term rental must remain an accessory use to your full-time occupancy.

Under no circumstance shall the short-term rental services become the primary use of the property.*


 This is for the unincorporated County area. The City is much more agreeable. 

User Stats

67
Posts
17
Votes
Justin Koopmans
Pro Member
  • Investor
  • Everywhere, USA
17
Votes |
67
Posts
Justin Koopmans
Pro Member
  • Investor
  • Everywhere, USA
Replied Mar 21 2024, 15:20

@Noah Laker what kind of properties are you buying in Sac to turn into STRs? Single family homes? I'm an investor that lives in Amador county (near you), but I've struggled to make the numbers work for STR near me.

User Stats

394
Posts
319
Votes
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
319
Votes |
394
Posts
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
Replied Mar 21 2024, 15:26
Quote from @Justin Koopmans:

@Noah Laker what kind of properties are you buying in Sac to turn into STRs? Single family homes? I'm an investor that lives in Amador county (near you), but I've struggled to make the numbers work for STR near me.


Primarily multifamily, some SFR, renting by the bedroom can also be quite lucrative. Happy to connect and show you some of the deals we've been doing. A lot of my investors are just buying A-class for the tax benefit and breaking even.

User Stats

10
Posts
8
Votes
Simon Lee
  • Investor
  • Sonoma County
8
Votes |
10
Posts
Simon Lee
  • Investor
  • Sonoma County
Replied Mar 22 2024, 09:40
Quote from @Noah Laker:
Quote from @Simon Lee:

I just looked up the Sacramento STR laws and it appears to be accessory use only, meaning you can rent out a room (house hack) or ADU, but you must be a primary resident of the property and prove it. That's a bummer. I have family in Sacramento and Roseville and was hoping to deploy some capital there.

*The short-term rental must remain an accessory use to your full-time occupancy.

Under no circumstance shall the short-term rental services become the primary use of the property.*


 This is for the unincorporated County area. The City is much more agreeable. 

Thanks! That's very good info.  I have a few multifamily listings that I am interested in getting more info on.  Can we connect?

User Stats

295
Posts
175
Votes
Scott Scoville
Pro Member
  • Real Estate Agent
  • Sacramento, CA
175
Votes |
295
Posts
Scott Scoville
Pro Member
  • Real Estate Agent
  • Sacramento, CA
Replied Mar 22 2024, 11:28

@Noah Laker I agree. Sacramento is the #1 market that people from the bay area are moving to. Sacramento metro is 2 million + residents, growing medical industry, majority of state jobs, and is 2 hours from the ocean and 2 hours from Lake Tahoe. Affordability for a major CA city is still solid, and still seeing steady price and rent growth. With a lack of housing, and increasing demand, I'll keep buying in Sacramento until it doesn't make sense anymore. 

Scoville Realty & Investments LLC Logo

User Stats

64
Posts
39
Votes
Daniel Zapata
Pro Member
  • Rental Property Investor
  • Bay Area, CA
39
Votes |
64
Posts
Daniel Zapata
Pro Member
  • Rental Property Investor
  • Bay Area, CA
Replied Mar 22 2024, 17:02

There are provisions for owner-occupied and non-owner occupied STRs in Sacramento : https://www.cityofsacramento.gov/finance/revenue/short-term-...

The latter requires a conditional use permit but I don't see any info about that in the website.

User Stats

37
Posts
27
Votes
Replied Mar 24 2024, 19:50

@Noah Laker,

Interesting insight you have. I would be interested to see the PriceLabs market data on the 3 markets you've mentioned, and how they compare to Gatlinburg, TN or Joshua Tree, CA.  

I think what appeals to Sacramento is the proximity comfort to Bay Area investors. Just my 2 cents.

BiggerPockets logo
BiggerPockets
|
Sponsored
Find an investor-friendly agent in your market TODAY Get matched with our network of trusted, local, investor friendly agents in under 2 minutes

User Stats

394
Posts
319
Votes
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
319
Votes |
394
Posts
Noah Laker
  • Real Estate Broker
  • Sacramento, CA
Replied Mar 26 2024, 15:03
Quote from @Angelo Cortez:

@Noah Laker,

Interesting insight you have. I would be interested to see the PriceLabs market data on the 3 markets you've mentioned, and how they compare to Gatlinburg, TN or Joshua Tree, CA.  

I think what appeals to Sacramento is the proximity comfort to Bay Area investors. Just my 2 cents.


 The data doesn't bode well for these vacation markets. They really plateaued and fell off in the last year. Certainly we can expect some recovery, but all the free government handouts from COVID sparked a short-lived travel spree that seems to be over. 

User Stats

798
Posts
670
Votes
Replied Mar 27 2024, 20:13

I'm with you @Noah Laker , I think there is huge potential in college towns and mid-to-large cities so long as you do your homework on the legal side. Between work related stuff, conventions, friends/family visits, pro/college sports, kids travel sports, concerts etc etc there are a billion reasons why people visit places like Sacramento and other cities that aren't your typical vacation destinations. IMO the "only invest in vacation towns" mantra led too many people to invest in the same small handful of markets who are now hurting. We all know which ones those are. 

I'm in a smaller regional city and I have great occupancy every month except for January. With a bit of decor and management savvy you can easily be in the top quarter or even 10% without needing to build a waterpark in your backyard and bring in influencers for your photos. More exit strategies and less volatility as well.