Profiting from Arizona investment properties is possible when you know how to handle the real estate market. Keeping up with the latest changes in market trends and other impacting factors is one way to do so. Property investors should study their markets before putting their money in them. For a smart real estate investment in the Arizona housing market 2019, here’s what you should and shouldn’t do.
DO Consider Some of the Smaller Markets
The Arizona housing market is currently a very hot seller’s market. This means that demand is up and the supply of housing inventory is low. According to Zillow, the median home value of Arizona real estate properties went up by 6 percent within a year and is currently $253,300. According to Mashvisor’s data for the Arizona housing market 2019, here’s what the real estate prices and days on market look like:
- Median Property Price: $408,105
- Price per Square Foot: $337
- Price to Rent Ratio: 20
- Average Days on Market: 95
So right now, generally speaking, sellers in the Arizona housing market have the upper hand and can negotiate deals to better suit their goals- which is to get the highest price for their home. Don’t worry though as this isn’t true for every city in Arizona. Yes, tighter inventory is expected to lead to higher property prices in 2019 and 2020, but buyers can still make profitable investments in the Arizona real estate market. While some areas like Scottsdale and Sedona are following the same statewide trend, others are still offering cheap properties for sale. According to Mashvisor’s investment property calculator, these markets also have high performing rental properties:
- San Luis – Yuma County: Median Property Price of $154,839
- Coolidge – Pinal County: Median Property Price of $160,359
- Bisbee – Cochise County: Median Property Price of $199,625
To search for Arizona investment properties in these markets, click here.
DON’T Ignore Airbnb Regulations in the Arizona Housing Market
An Arizona vacation home rental investment can be quite profitable, but before making that investment, know how important it is to follow the Airbnb laws. Just how strict is the Arizona housing market on Airbnb rentals?
Due to increased complaints from local neighborhood residents, a new law, House Bill 2672, was passed in efforts of putting an end to short term rentals being used for special events (parties, weddings, receptions). It wasn’t the easiest thing getting this law passed as the state did ban cities from regulating short term rentals back in 2017. The new law originally included some restrictions on rentals owned by real estate investors, as well as a limit on the number of guests. However, these stipulations were excluded from the final law passed.
So what does the new law actually prohibit in the Arizona housing market? Well, this new law now allows Arizona municipalities to restrict rentals to overnight stays and bans events such as weddings or anything else which would otherwise require a permit. Short term rental owners are now also required to provide contact information for someone responsible for handling complaints in that area. Also, any owner of a short-term rental who doesn’t have a sales tax license is no longer allowed to operate that rental property. The number for this sales tax license must also be listed on any advertisements for this short term rental. Violators will be fined a fee which can range from $250-$1500 or even more.
DO Invest for Cash Flow
When it comes to real estate investors, there are two ultimate goals they can aim for: cash flow or appreciation. If you want to start generating some return from an Arizona investment property almost immediately, you should narrow down your prospects based on cash flow. When you invest for real estate appreciation, you’re looking at the long term return expected to be made on this property through increased value. They can both be profitable real estate investment strategies in this market, but why do we recommend that, when buying a house in Arizona, you let cash flow drive your decision?
The best places to invest in real estate when pursuing cash flow are the places where there is housing demand. Phoenix, AZ came in at number 17 as the best place to retire and ranked 26th as the best place to live in the U.S. News & World Report. This could explain the 1.6 percent increase in population and 3.4 percent growth in employment. One of the most notable increases was the 8.9 percent growth in Arizona’s manufacturing sector.
All of these things combined indicate a healthy economy and an environment that people would like to move towards. As people continue to seek things like job opportunities and affordable housing, a steady flow of in-migration to Arizona makes it one of the best places to buy rental property. Seeing as nearly 40 percent of the Arizona housing market rents, as long as housing demand is up, your Arizona rental property will perform well.
DON’T Invest Without Using Real Estate Data
Some of the best tips for Arizona real estate investments are all centered around having reliable real estate data. The biggest don’t for the Arizona housing market is to go in blind. An investor’s best friend is data. Data on the state and local markets as well as rental property performance can definitely help you make your way through the Arizona housing market this year. Here is the state-level data for Arizona:
- Monthly Traditional Rental Income: $1,670
- Traditional Cash on Cash Return: 2%
- Monthly Airbnb Rental Income: $2,370
- Airbnb Cash on Cash Return: 3%
- Airbnb Occupancy Rate: 53%
Similar to the data on the state level, we’re now going to give you data on the top-performing cities in the Arizona real estate market. Now you’ll have a better idea of where to start looking for your next rental property investment in Arizona.
Marana (Best for Airbnb)
- Median Property Price: $313,074
- Price per Square Foot: $162
- Price to Rent Ratio: 19
- Average Days on Market: 84
- Monthly Airbnb Rental Income: $3,713
- Airbnb Cash on Cash Return: 9%
- Airbnb Occupancy Rate: 52%
Florence (Best for Traditional)
- Median Property Price: $214,082
- Price per Square Foot: $129
- Price to Rent Ratio: 9
- Average Days on Market: 66
- Monthly Traditional Rental Income: $1,949
- Traditional Cash on Cash Return: 6%
Tucson (Best for Airbnb)
- Median Property Price: $269,798
- Price per Square Foot: $145
- Price to Rent Ratio: 19
- Average Days on Market: 59
- Monthly Airbnb Rental Income: $2,414
- Airbnb Cash on Cash Return: 5%
- Airbnb Occupancy Rate: 57%
Pinetop (Best for Traditional)
- Median Property Price: $441,660
- Price per Square Foot: $188
- Price to Rent Ratio: 10
- Average Days on Market: 77
- Monthly Traditional Rental Income: $3,553
- Traditional Cash on Cash Return: 7%
It really isn’t difficult making a profitable investment in this market, especially when you use Mashvisor’s tools to search for and analyze Arizona houses for sale. Interested in our services? Learn about your options for signing up.