Dublin, CA · Member since 2020 · 69 posts · 15 votes
Hi All,
I have been on and off looking into getting an investment property in the Sacramento area. I am planning to get a NON-HOA single-family or multifamily in the Sacramento area (open to Elk grove, Arden-arcadia, South natomas). I have two queries: Has anyone recently done this or is aware of any permit etc needed for the short term rental? Secondly, are there any better areas than others like South Natomas or any for that matter.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
If you want big cash flow, then go for the major STR markets and beat the competition. Its more headache but you can cashflow really good compared to a long term investment. If you want to chill and play the appreciation game a bit (maybe you don't care about cashflow rn) then buy a home in a good area - I did a 1031 from my property in Joshua Tree into a SFH in Livermore CA - and try to hold on to it.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
Hey Prachi - I've done airbnbs in both vacation rental areas as well as metropolitian areas, like San Jose. Just google Sacramento Short term regulations and go to the city website and read their requirements. Permits are needed for short term rentals. However, if youre looking to make solid cash flow, there are plenty of better markets.
Real Estate Agent · Grass Valley, CA · Member since 2017 · 185 posts · 198 votes
4y
I would recommend foothills out of Sac - like Auburn, Grass Valley, Murphys, etc... these are places people drive to form Bay Area to get away, weddings etc...
Property Manager · California Washington North Carolina South Carolina, Georgia and Alabama · Member since 2020 · 71 posts · 27 votes
4y
Hello Prachi,
I have a client with a duplex in midtown/oak park neighborhoods and the City only allowed him to rent half the units on less than a 6 month term. I definitely would encourage you to check local guidelines before investing. Rental areas to consider could be Natomas, West Sac, Elk Grove, Arden-Arcade and Woodland areas.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
@Brian Song no, I don't like San Jose or generally any metropolitan areas for short term rentals. I like purely vacation areas only. The reason is because most people traveling to San Jose are for non-vacation reasons. Work, visiting family, etc. they are looking for the cheapest bang for their buck. However, in vacation markets, people are looking for someplace awesome to spend their weekend and are willing to overspend. I rented half of a duplex in San Jose walking distance to valley fair mall and could barely charge $150 a night. I bought a 225k property in Joshua tree with a PITI of $800 and was charging $200-325 a night because that's a true cvacation market. If you do metropolitan, I'd stick to "mid term stays". However from my experience, traveling nurses won't pay much for rent either. They are also looking for a budget. So even though I am walking distance to a huge hospital, it never worked out for me to rent to nurses - even though I got plenty of requests.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
@Brian Fitzgerald do you know what areas are the best for traveling nurses? I'm thinking about buying a unit with a large lot and perhaps building an ADU and renting them to nurses
Dublin, CA · Member since 2020 · 69 posts · 15 votes
4y
@Michael Hyun I am planning to do something similar with SFH or multi-family that I want to invest in. I am planning to rent it out as a furnished rental to travel nurse. Are there any particular area that are better than other?
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
@Prachi Metha I would first ask what you want to do - what are you trying to achieve. I managed a STR before and its great cash flow if you find a great home. 2020 was a travel boom for non-metro areas, so places like Joshua Tree had record setting revenues for Airbnbs - That's why major STR markets are super inflated right now. I'm not sure that this will continue because the number Airbnbs popping up there is insane and prices are going to drop when travel slows down. Plus, homes are twice as expensive as they were a year before. The home in Joshua Tree I bought in Oct 2020 went from 225k to 500k in one year. (I bought an old home, I did a full renovation on it, airbnb'ed it for one year and netted 20k, and sold it as a turnkey airbnb a year later). The margins are nowhere near as good nowadays if you want to buy a home in Joshua Tree. Another thing that scares me about joshua tree is that its not a great area. If there were to be a depresssion, I feel like this is the area that would depreciate first and the most.
However, traveling nurses are getting paid even more nowadays since COVID - and they are in high demand. I left Joshua Tree to invest in somewhere more long term like Sacramento, but this is not a huge vacation area in my opinion - at least not compared to Joshua Tree or other areas near national parks. But the problem with sacramento is that I feel like the best located properties don't cashflow. However, you can rent to nurses for an increased rate, thus making cashflow while holding on to the best quality listings - the ones that are the most likely to appreciate and/or be stable in times of depression.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
If you want big cash flow, then go for the major STR markets and beat the competition. Its more headache but you can cashflow really good compared to a long term investment. If you want to chill and play the appreciation game a bit (maybe you don't care about cashflow rn) then buy a home in a good area - I did a 1031 from my property in Joshua Tree into a SFH in Livermore CA - and try to hold on to it.
Dublin, CA · Member since 2020 · 69 posts · 15 votes
4y
@Michael Hyun Thank you so much for the detailed response. My husband has a job in Sacramento and has to travel there for few times a month. He plans to stay there a few times a month so we want to get an STR furnished and rent by the room or rent out the whole place depending on the situation. Eventually, we plan to convert it to a Long term rental and hold it. We are not looking for a major positive cash flow but certainly cannot afford a negative cash flow.
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
Even with furnished rentals, I wouldn't expect great cashflow in Sacramento. I'd expect something closer to break-even or just a little cashflow in higher priced neighborhoods. You have to realize the market is always fluctuating for STR or MTR (mid term rentals). If you can't afford the negative cashflow, I wouldn't risk doing MTR with a home in Sacramento. If something happens and you have to LTR (and now you negatively cashflow) then you're stuck with a negatively cash-flowing property until you sell. My mindset is more like "Even if it was a LTR and negatively cashflow, I'd still be okay. But to sweeten the deal, I'll do MTR while the market is good for it".
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
Plus you have to consider the fact that you have to invest about ~$6,000-$10,000 (depending on how big and how nice you want to furnish) for each unit you want to do MTR on.
Investor · Sacramento, CA · Member since 2019 · 44 posts · 38 votes
4y
Sacramento county only allows STRs in primary residences (or with long term tenant in same property), otherwise you can rent out short term for only under half a year. They don’t allow non occupied full time STRs. ADUs and JADUs can’t be used as STRs either.
Dublin, CA · Member since 2020 · 69 posts · 15 votes
4y
@Mike Malyy@Michael Hyun Thank you so much for the wonderful info. I was actually talking MTR (3 to 6 months lease) not really a Airbnb or VRBO kind. Again not sure if it will be successful so might have to convert it into LTR. So I might want to look at the areas which will work in both MTR and LTR situations. Are there particular areas that I should focus on?
@Michael Hyun A good friend of mine just plugged me in with an investor realtor who helped him purchase two multi families in Sacramento. He had many good things to say about the realtor and his knowledge and has a contractor for any renovations. I'll be talking with the realtor next week to get started in my search. If you want to talk with him as well, just direct message me and I can forward along his info.
@Trish Mccoy My wife and I are deciding on whether to make our next property a LTR vs. STR. I did some prelim research in the areas you recommended outside of Sac and was intrigued. What kind of net income numbers are you getting in those areas?
Investor · San Jose CA · Member since 2018 · 114 posts · 73 votes
4y
I'm a huge believer in STR - there are always pros and cons though. As a young, unmarried, remote working individual, I have the time and energy to put more effort into STRs. I went down to Joshua Tree for two months to do renovations with my dad - most people aren't willing to do that. If you want to connect, I'll try my best to convince you why you should switch to the STR side :)
Markets that are popular for ADU's would be Midtown, Curtis Park, Tahoe Park in Sacramento (there would be places with detached garages or the space to place the ADU's. If you are looking to Roseville you would be looking in the Vineyard or Los Cerritos neighborhoods with similar setup.
I would recommend foothills out of Sac - like Auburn, Grass Valley, Murphys, etc... these are places people drive to form Bay Area to get away, weddings etc...
Hi Trish, how is the demand in those areas of Auburn, GV and Murphys? I have been to Auburn a few times but never Grass Valley or Murphys
I'm working with traveling nurses and shopping for smaller SFH to purchase and then add an ADU in the back. I’m looking for resources to help finance/build the ADU and a local investor-agent to locate property.
Does anyone have someone in mind and would appreciate any help/advice . I live SF and I’M Not familiar with the Sacramento market.