High Rental Rates in Sacramento Area Good For Investors
by Rick Delgado
on Thursday, January 28th, 2016 at 9:54am.
There's good news for revenue property owners in Sacramento.
The city has one of the highest rental rates in the United States after rents rose by 10% in January from a year earlier.
A study by Yardi Matrix shows Sacramento sitting tied at No. 2 with San Francisco among 30 U.S. rental markets. Only Portland had a higher rental increase, coming in at 14% for January 2015.
The average rental rate in the Greater Sacramento area for all rentals is $1,158. One bedrooms rent for an average of $1,032.
Over the last quarter, Sacramento had a rental appreciation of 0.8% of "renter by necessity" apartments, which was the highest level of any city in the U.S. Yardi Matrix defines such apartments as those rented by people who can’t afford to own, often younger adults or lower middle-income households.
This presents a great opportunity for investors to get into the rental market to make some additional revenue from real estate in Sacramento.
Over the past three months, Sacramento had a 0.5% drop in rents for "lifestyle" renters - those who have the money to buy a home but decide to rent because of location or preference to not own a home.
Market watchers have noticed the increase in rental rates in Sacramento are because of the city's limited new supply. Of the 30 markets studies, Sacramento's stock of new rental units was 0.7%, which was last of those cities. Only the Inland Empire area had a supply rate lower than 1%.
To that end, Yardi Matrix projects Sacramento rents will grow by another 8.8% over the rest of the year. By comparison, the national average growth among top markets over the last year was 6.4%, and Yardi’s forecast for this year suggested more moderate rises.
Yet, even with uncertainty about economic headwinds and a lack of affordable versus luxury projects, the multi-family sector trend is still positive, according to the Yardi Matrix.