Hi Adam -
I’ll add my experience. (Fair warning: I’m not sure how relevant this is for you since the original post was 4 months ago and my experience in the Davis market is somewhat dated.)
We moved to CA in February of 2015. Initially, we rented in Davis for about 8 months (Primary reason: excellent schools Secondary: splitting the commute difference between Sac and Travis AFB). The rental market was interesting. Most landlords wanted to be in sync with the school schedule having the leases from summer to summer. Almost all the rental availability posts were for vacancies that were five/six months out. The properties that were available immediately would sometimes have an hour or two timeframe to accept applications and cut them off so they didn’t have to deal with lines out the door/floods of responses. Basically it seemed like a game of high credit scores and speedy responses. The place we rented was only available outside of the school cycle because the owner had passed away. Their goal was also to end the lease in the summer and follow the same path as other landlords. We applied on-site with three completed applications in front of us. The place still had lots of cleanup to do and a bathroom that was completely ripped apart with a toilet to replace (ie they didn’t have a problem renting it out even before it was ready for market). Our neighbors actually did long term AirBnB in their primary residence for students/faculty etc that couldn’t find immediate local housing. They did really well with it. I know there were some potential AirBNB regulation changes they weren’t excited about but I didn’t keep tabs on how that impacted them. We ended our Davis lease early to buy a house and helped find a replacement tenant. We were specifically asked only to post on Craigslist vs all the major sites to limit the number of applicants.
For our primary residence purchase, we weren’t where we are now in regards to the investment mindset, however; my husband and I both moved frequently for our jobs and liked the flexibility of multiple exit strategies (ie sell or rent). Davis had a history of more price stability during market shifts and great schools/low crime rates for resale considerations but we ultimately chose not to buy there for 2 reasons.
1.) We wanted the option to keep the property as a rental. For the most part, the purchase price vs rental rates in Davis didn’t line up in way that was profitable without doing the rent by the room gig. Rent at the time was similar to what we’d pay in Sac at a much cheaper purchase price.
2.) The town has a low growth type approach. Good from a landlord supply vs demand perspective. However; I’ve also received feedback that their permit process is challenging (slow, lots of restrictions on what you can and can’t do etc) partly because they want to keep the smaller town community feel it has now. We were planning to buy a value add property and didn’t what the headache especially if it prevented us from making major changes we were interested in. Note: We didn’t confirm or investigate further with the permit office.
We ultimately purchased in Elk Grove near a great high school for 100-200k less and almost twice the square footage of the higher price point in Davis. Additionally, with updates and appreciation, we can easily rent it out over the mortgage payment plus property management. This isn’t necessarily the area where I’d jump to for Sacramento metro investment but it worked for our primary residence needs at the time.
As for Sacramento itself, our software project started at the end of 2015. We had a lot of people moving in from out of state that had trouble finding rentals. They had a lower scale experience of what we ran into in Davis. We started telling people to show up with a print out of their credit score and deposit in hand to increase their chances. The new people that come on today don’t seem to have as many issues finding a place but the landlords we know also haven’t had a problem finding tenants that meet their criteria. I work downtown near Golden One, which they’ve built up like crazy and there are future plans that include a soccer stadium and medical facility. On the West Sacramento side, there have been a lot of updates near the river just over the bridge from downtown. We have a lot of employees buy/rent there and commute by bike over the yellow bridge. One thing with Sac metro is that I would do more due diligence in regards to the location. There are higher crime areas, larger discrepancies between schools etc. Personally, we’ve been considering a house hack multi-family closer to the office but we keep shying away with rent control and out of state opportunities.
Hopefully this helps give you a little better idea of the areas!
-Jean
