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The Benefits of Investing in Short-Term Rentals (STR) in Sacramento​
Investing in short-term rentals (STR) is becoming an attractive option in Sacramento, where the unique market dynamics are creating opportunities for excellent returns, especially when compared to long-term rentals (LTR). Known for its thriving culture, historic landmarks, and proximity to destinations like Napa Valley and Lake Tahoe, Sacramento enjoys a steady flow of tourists year-round, which STR investors can capitalize on.​Unlike traditional long-term rentals, STRs offer the flexibility to adjust nightly rates based on demand, potentially leading to higher monthly revenue. While LTRs can offer stability, STRs allow for more frequent rent adjustments, enabling owners to better cover maintenance costs and capitalize on Sacramento's seasonal tourist influx. For those looking to maximize their real estate investment, Sacramento’s STR market offers a blend of affordability, flexibility, and high demand, making it a smart choice for both new and experienced investors.
​Here’s the difference between STRs and LTRs in Sacramento and why short-term rentals could be the right fit for your portfolio:
Short-Term Rentals (STRs)
Earnings Potential
STRs often have higher earning potential compared to LTRs. In Sacramento, average nightly rates for STRs are around $170, with occupancy rates of approximately 72%This can translate to significant monthly revenue, especially during peak tourist seasons or events.
Flexibility
Property owners can use their property personally during vacant periods, allowing them to block dates when needed. This flexibility can be a significant advantage for owners who want to enjoy their investment.
Management Intensity
STRs require more active management, including guest communications, cleaning between stays, and ongoing marketing efforts. This can be time-consuming, although many owners hire property management companies to alleviate some of the workload.
Market Demand
Sacramento has a growing STR market, driven by tourism, business travel, and events. This demand contributes to the high occupancy rates mentioned earlier.
Regulations
STRs are subject to local regulations and licensing requirements, which can vary by city. In Sacramento, hosts must adhere to specific guidelines, including limits on the number of nights rented.
Stable Income
LTRs offer more predictable income streams through long-term leases, typically ranging from six months to a year. This stability can be advantageous for budgeting and financial planning.
Less Management
Once a tenant is in place, LTRs require less ongoing management compared to STRs. Owners don’t have to deal with frequent turnovers and the associated cleaning and maintenance
Tenant Responsibility
Long-term tenants generally take better care of the property, as they view it as their home. This can lead to fewer issues with property damage and maintenance
Lower Vacancy Rates
LTRs typically experience lower vacancy periods than STRs. A tenant may stay for years, reducing the frequency and costs associated with finding new occupants
Legal Considerations
LTRs come with legal complexities, including tenant rights and eviction processes. Owners must navigate these regulations carefully to avoid legal issues
Long-Term Rentals (LTRs)
Current Market Insights
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As of 2024, Sacramento's rental market remains competitive, with the average rent for a one-bedroom apartment at approximately $2,050 per month.
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STRs can significantly outperform LTRs in terms of revenue, particularly during events or tourist seasons. For example, properties listed on platforms like Airbnb and VRBO can generate much higher income than the monthly rental equivalent of a long-term lease.
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Here’s a graphic comparing short-term rentals (STRs) and long-term rentals (LTRs) in Sacramento across various categories. The scores range from 1 to 10, with higher scores indicating better performance or advantages in each category:
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Earnings Potential: STRs tend to offer higher earnings compared to LTRs.
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Management Intensity: STRs require more management efforts than LTRs.
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Flexibility: STRs provide more flexibility for personal use of the property.
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Market Demand: STRs benefit from strong demand due to tourism and events.
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Stability: LTRs offer more stable and predictable income.
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Vacancy Rates: LTRs typically have lower vacancy rates than STRs.
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Investing in Sacramento’s short-term rental market offers flexibility, higher earning potential, and the chance to tap into a thriving tourism economy. Whether you’re a seasoned investor or just starting, exploring STRs in Sacramento could be the move that elevates your portfolio. Ready to make the most of this opportunity? Contact us today to learn more about how STR investments can work for you!
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REAL ESTATE
Are you looking for a new property to rent out as a short-term rental? We will be your best friends on your way to financial freedom. We partner with local brokerages who specialize in AirBnB and Short-Term Rental properties.
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If you are interested in Sacramento multifamily, Phoenix/Scottsdale, Tucson, or any other market, please fill out the contact form below and we will connect you with a local agent who knows STR.