The California real estate market continues to improve The Golden State’s renowned reputation for having lucrative real estate markets. While cities like Los Angeles and San Francisco usually headline the California real estate market, there are many other rental markets in the state to consider.
Two such rental markets real estate investors will profit from are the San Diego real estate and Sacramento real estate markets. So, as a real estate investor, should you invest in San Diego real estate or in Sacramento real estate? We’ll make a case for both, allowing you to decide what is best for you.
San Diego
San Diego is the second most populated city in California, and with that comes many real estate investment opportunities. As a result, the San Diego real estate market is one of the most profitable in the state. Take a look at the city’s data, obtained by Mashvisor’s investment property calculator, to see just how lucrative the market is.
Related: Mashvisor: The Best Rental Property Calculator You Could Ask For
Median Property Price: $831,560
Traditional:
Rental Income: $2,678
Cap Rate / Cash on Cash Return: 1.19%
Airbnb:
Rental Income: $2,208
Cap Rate / Cash on Cash Return: 0.97%
While the median San Diego investment property price may be well above the national average, it is in a moderate range within California. Nonetheless, the San Diego real estate market is very profitable for both traditional and Airbnb strategies.
Best Neighborhoods in San Diego: Traditional
With the highest education level among adults in the country, a strong white-collar economy and a large population, it’s no surprise San Diego real estate is excellent for traditional investment properties. The three best neighborhoods in San Diego real estate for traditional investing are La Jolla, Gaslamp Quarter, and East Village.
1.) La Jolla
Median Property Price: $1,343,167
Rental Income: $4,414
Cap Rate / Cash on Cash Return: 1.78%
2.) Gaslamp Quarter
Median Property Price: $706,022
Rental Income: $3,265
Cap Rate / Cash on Cash Return: 2.64%
3.) East Village
Median Property Price: $562,223
Rental Income: $2,508
Cap Rate / Cash on Cash Return: 1.77%
Best Neighborhoods in San Diego: Airbnb
A San Diego investment property can also be very profitable as an Airbnb rental. The city welcomes almost 35 million tourists every year, ensuring a wide pool of Airbnb guests. Add this to the fact that San Diego is a coastal California city, and it becomes clear why an Airbnb San Diego investment property is a money-making investment. The best neighborhoods in San Diego for Airbnb are Mission Hills, Pacific Beach, and Balboa Park.
1.) Mission Hills
Median Property Price: $1,631,986
Rental Income: $7,309
Cap Rate / Cash on Cash Return: 1.92%
Occupancy Rate: 67%
2.) Pacific Beach
Median Property Price: $1,198,562
Rental Income: $3,617
Cap Rate / Cash on Cash Return: 1.27%
Occupancy Rate: 67%
3.) Balboa Park
Median Property Price: $541,667
Rental Income: $2,761
Cap Rate / Cash on Cash Return: 1.5%
Occupancy Rate: 64%
Sacramento
The Sacramento real estate market is not as large as San Diego’s, but it is still a top performing market in the California real estate market. Here is the market’s data, according to Mashvisor’s investment property calculator:
Median Property Price: $370,263
Traditional:
Rental Income: $1,380
Cap Rate / Cash on Cash Return: 0.98%
Airbnb:
Rental Income: $864
Cap Rate / Cash on Cash Return: 1.06%
The main highlight of the Sacramento real estate market is its affordable median property price, which is very low relative to the entire state of California. The average Sacramento investment property generates less rental income than the typical San Diego investment property. Nonetheless, Sacramento properties are still very lucrative. Airbnb rentals in Sacramento, in particular, provide a higher ROI than those in San Diego.
Best Neighborhoods in Sacramento: Traditional
Just like San Diego, Sacramento real estate prefers traditional real estate investing over Airbnb. Also, just like San Diego, Sacramento is home to an educated workforce in its very diverse economy. Due to these factors, and having affordable investment properties, the Sacramento real estate market is a traditional real estate investing powerhouse. The best neighborhoods in Sacramento for traditional investing are Land Park, Upper Land Park, and Boulevard Park.
1.) Land Park
Median Property Price: $489,000
Rental Income: $2,066
Cap Rate / Cash on Cash Return: 1.26%
2.) Upper Land Park
Median Property Price: $446,700
Rental Income: $1,716
Cap Rate / Cash on Cash Return: 0.94%
3.) Boulevard Park
Median Property Price: $480,000
Rental Income: $1,860
Cap Rate / Cash on Cash Return: 0.87%
Best Neighborhoods in Sacramento: Airbnb
Sacramento may not be a coastal city like San Diego, but it still is a city with successful Airbnb investing opportunities. The city sees many tourists visiting it per year for the city’s music, film, and museum cultural aspects. The typical Airbnb Sacramento investment property also has less legal issues compared to those in San Diego.
Related: Your Real Estate Investment Guide to Airbnb Properties: Where Is Airbnb Legal?
As a result, Airbnb investors can expect a profitable and smooth investing opportunity in the Sacramento real estate market. The best neighborhoods in Sacramento for Airbnb, according to Mashvisor’s investment property calculator, are North Oak Park, East Sacramento, and Curtis Park.
1.) North Oak Park
Median Property Price: $365,000
Rental Income: $2,967
Cap Rate / Cash on Cash Return: 3.37%
Occupancy Rate: 68%
2.) East Sacramento
Median Property Price: $605,950
Rental Income: $3,184
Cap Rate / Cash on Cash Return: 2.29%
Occupancy Rate: 48%
3.) Curtis Park
Median Property Price: $789,000
Rental Income: $2,997
Cap Rate / Cash on Cash Return: 1.32%
Occupancy Rate: 67%
Invest in San Diego Real Estate or Invest in Sacramento Real Estate?
Both the San Diego real estate market and Sacramento real estate market are cities with great money-making real estate opportunities. That said, each city has its own positives to focus on.
San Diego Real Estate:
The average property in San Diego real estate has higher rental income for both traditional and Airbnb strategies. The average San Diego investment property will also have a higher traditional ROI than that of a Sacramento property.
Sacramento Real Estate:
The Sacramento real estate market has much more inexpensive property prices compared to San Diego. Airbnb ROI is also higher for the average Sacramento investment property than for the average San Diego investment property.
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