Continuous monitoring of the structural health of buildings can be achieved by placing acceleration sensors at various locations on the structure. Considerable variations in the dynamic response captured through these measurements can be used to identify damage due to aging or extreme load effects. Accurate estimation of modal dynamic behavior using acceleration measurements is critical for efficient structural health monitoring (SHM) of buildings under limited economic resources. In this study, an analytical approach is presented to determine theoretically the optimal number and placement of sensors in a typical five-story reinforced concrete frame building, ensuring that accuracy in modal response is not compromised. In this regard, acceleration responses at each floor level are recorded from time-history analyses of the building’s finite element model under several earthquake ground motions, simulating a complete set of SHM system measurements during seismic events. Then, considering exhaustive search optimization for sensor placement, the operational modal analysis method of Enhanced Frequency Domain Decomposition (EFDD) is applied to extract modal parameters such as the first-mode natural frequency, damping ratio, and mode shape from the simulated monitoring data. The accuracy of the estimated modal parameters from different sensor design alternatives is compared with those from the benchmark sensor configuration to determine the optimal number and locations of sensors. The findings of this research also highlight the importance of using different modal identification methods in SHM.