Why do SF Bay investors skip Fairfield/Vacaville for Sacramento?

Question

I've been looking around the Sac/Folsom area for singles, duplexes, and quads recently and this time on our way back home to the Bay Area we stopped in Vacaville and Fairfield and found they were both very cute and reasonably priced. What am I missing? Is this not a decent place to invest in real estate that's half as far away as Sac/Folsom?

Thanks.

-Bill

Thanks.

-Bill

Wes Blackwell · Answer

@Bill Fried

Well for one, let's take a look at median home values:

Fairfield: $442kVacaville: $442kSacramento: $317k

So for an investment property with 25% down and a 5% interest rate, Sacramento is going to be about $670 less per month for PITI ($1,698.96 in Sacramento vs. $2,368.90 in Fairfield / Vacaville).

Yet, according to rent cafe, the average rent is only about $400 more in Fairfield ($1,681) than in Sacramento ($1,289).

Plus, Sacramento has a year-over-year rent growth rate that's triple the national average:

https://www.biggerpockets.com/forums/621/topics/590913-rent-growth-in-sacramento-is-triple-the-national-average

Further, Solano county has a population just shy of 500,000... while Sacramento county has a population three times that at 1.5 million (add another 375k for Placer county too). Fairfield and Vacaville don't offer enough of a "big city feel" to attract Bay Area millennials. That's why they're moving to Sacramento instead:

https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush

As more and more tech companies allow employees to work from home or commute part time, and more and more start ups head out to Sacramento to save on office space and employee pay, the city will just get better and better.

And while it will take AT LEAST another decade to come to fruition, once the high speed rail project connects Sacramento to San Francisco in under an hour, Sacramento will BLOW UP when tech employees with $150k+ per year salary realize they can cut their housing costs by 50-75% and live like a king in Sacramento... all the while working on the train into the city (or doodling around on Facebook instead of having to focus on the drive and deal with traffic).

https://www.sfcta.org/california-high-speed-rail-project

I know Sacramento better than just about any agent or investor out there (toots own horn), and these are the reasons investors (and residents) are skipping over smaller areas like Vacaville, Fairfield, Tracy, Modesto, Merced, etc. are instead setting their sights on Sacramento.

Ernesto Hernandez · Answer

Night and day in terms of lifestyles.

Vacaville and Fairfiled are 100% suburban. If the outlets weren't in Vacaville I promise you nobody would know where it was. And people know where Fairfield is because they know how close it is to Vacaville.

Sacramento is revitalizing, very very quickly. Universities (Davis and Sac State). A good sized airport. The 80 crosses the 5. Downtown is booming. A brand new arena. Nightlife. Restaurants.

Not much of a comparison really.

Vacaville and Fairfiled are an easier pill to swallow for SF area employees. One of the biggest motivators why people buy there.

Matt K. · Answer

Better hope the Travis AFB never closes.... or gets moved because that'll tank the area. Not much going on for that area outside of a few key things.... that don't even come on the radar compared to Sac.

Account Closed · Answer

Everyone has their opinion, but I don't think Sacramento is anywhere near its peak because it is a growing city. I just look at all of the businesses moving here. For heaven's sake, Shake Shack is coming to town. They could have thrown up another 5 locations in LA or a few in the Bay but they strategically picked Sacramento. Big brands like Kaiser, UC Davis, West Elm, Press Juicery, and Yard House believe in the next 10 years here, not to mention large developers like the Grupe Real Estate, who are trying to buy up every piece of vacant land and multifamily they can find. Sacramento was a sleepy town for its entire existence, but I think the influx of private business plus the stable government job market will make Sacramento look more like San Jose in 10 years than Sacramento of 2008. This comes from someone who does not even plan to live here in 10 years, lol.

Cody L. · Answer

Some people are not buying for cash flow.  They're buying because they want to own in a given area.  Tell their friends they have property in a given area.  Are betting on appreciation, etc.

not really my gig but eh -- it takes all types.

Elizabeth Goff · Answer

Yes Sacramento definitely more of an appreciation play.  High tech firms moving in (and people commuting from Sac).  More cosmopolitan and more happening than Fairfield so do believe upside lies in Sac.  But decent returns (for CA) in those other areas.....

Account Closed · Answer

I wish I could explain this phenomenon Bill! But at the moment I'm still wondering how everyone isn't skipping Sacramento, along with every other city in California.. with exception to flippers only! Fairfield and Vacaville are preeeetttty darn close to sacramento prices right now if you're really comparing apples to apples, right? Folsom is a newer, class A neighborhood if you're talking rentals.. is a comparable asset in Fairfield any cheaper than half a milli? I want 12-20 units for that price! LOL

Bill Fried · Answer

Thanks for the replies.

I currently live in a duplex in the Bay Area and work in tech in SF. In the two years since I bought the duplex it has appreciated a lot and cash flows a little. I'm sure it will continue to appreciate nicely over the next couple decades but for my next purchase I would like to find better cashflow. So, instead of going out of state like so many recommend, I started looking in the Folsom and Sacramento areas and found it was indeed cheaper but still not a ton of cashflow in the decent areas. Then after several very long drives up there, Fairfield and Vacaville caught my attention. They both look like places that might cashflow better and are 30-40 mins drive from Berkeley instead of nearly 2 hours away. One has a big outlet mall as mentioned earlier and the other has a military base. Seems like a lot of decent working class folks in both towns and not a ton of crime and no rent control either (Lots of  folks in Sacramento Country are pushing for Rent Control). I did notice they both seem to have some flooding problems in sections but otherwise they seem like decent possibilities for my next property. Unless I am missing something, which is very possible.

Armando Reyes-Antonio Castillo · Answer

We often forget but Sacramento is the capital of California after all, also, there are quite a few tech firms moving in the Sac area (as someone already mentioned). The city itself is growing (there is a new mall being built) and the forecast seems great for Sac. In Vacaville and Fairfield, there is not too much going on there when it comes to growth.

Sac is getting up there in price, however, it is still early enough to buy up there and gain some good equity!

Account Closed · Answer

Account Closed if I sold the two properties I own here if would be a big payday for sure. Long term upside, yes...  but who invests in long term upside in a toppy market like 2019? Buy high just to crash in a volatile market, to one day get past your starting point..  probably a full market cycle into the future.

I don't know if I agree with your 10 year comment. In 2018  my primary residence wasn't worth a lot more (if at all more) than it was in 2008. Appreciation plays should be made at the bottom phase of a market in the most volatile markets possible. Peak markets are best capitalized on by selling stuff,  but if one must hold they should do it in high yield non volatile assets. Debt paydown,tax breaks, etc.. are consistent regardless of where you invest, provided the loan amount and terms are the same..  so why not get that debt paydown in an asset that offers a higher return.

Congrats on the nice duplex check! Let me know if you ever want to grab a beer and talk real estate.

Why do SF Bay investors skip Fairfield/Vacaville for Sacramento?

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