Sacramento is not the most lucrative real estate market for people who want to get into the landlord business.
If you want to buy a single-family rental, you'll get the highest annual return in places like Atlanta, Baltimore City, and Pittsburgh. But not in Sacramento.
"Well if you're buying in Sacramento, the average return, if you're buying this year, is going to be below the national average," says Daren Blomquist with the research firm ATTOM Data Solutions.
He says the national average is 9 percent. In Sacramento, it's only 6.4 percent. That's because median sale prices for single family homes are rising faster than average fair market rents.
"The rents are increasing but at a slower pace than prices are increasing which means the yields on those rental properties are coming down and not as attractive in a market like Sacramento," says Blomquist.
He says investors who buy a single-family rental in Sacramento County this year will see a 5 percent lower return on their investment compared to properties purchased last year.
Meanwhile, a lot more people in their 20s and 30s are moving to places where they can afford to buy a home. This includes: Detroit, Kansas City, Dallas and even parts of Contra Costa County.
"The common denominator with those markets is they are much more affordable than even a market like Sacramento," says Blomquist.
The millennial share of Sacramento's population dropped 10 percent between 2014 and 2015 — the most recent data available.
"I do think that may be a sign that millennials are attracted to more affordable markets where home prices are lower and they can actually afford to either rent or eventually buy," says Blomquist.
Still, Sacramento County's percentage of millennials — 34 percent — is actually much higher than the national average of 20 percent.