Phoenix is the capital of Arizona and is located in the south-central part of the state, falling within the northeastern regions of the Sonoran Desert. The city has a population of over 1.6 million, making it the most populated city in the State of Arizona and the 5th most populous city in the United States. The city is expected to experience population growth that is well above the national average thanks to the strong net migration. This, along with the fact that the percentage of the population under the age of 44 is high, boosts economic activity in Phoenix. And with around 47.2% of residents living in rental properties rather than owning their own homes (according to NeighborhoodScout), investing in a Phoenix rental property is a great option.
Phoenix is not only the capital of Arizona, but with a diverse and strong economy, it’s the state’s economic center too. The Phoenix rental market will benefit from the fact that employment growth in the coming years will be twice the national growth rate. This is likely due to the continuing trend of major companies relocating their offices to Phoenix from more expensive cities. These companies can find more affordable real estate in the city than in other major metropolitan areas around the country. A leading industry in Phoenix is tourism. The city welcomes more than 10 million visitors who come to enjoy the major attractions like the Desert Botanical Garden and the various hiking trails and national parks. This provides ample real estate investment opportunities in the Phoenix short-term rental market. Other major industries include manufacturing, technology, and service industries.
The Phoenix real estate market is one of the top 3 markets in the Western Mountain Region of the US according to the annual PWC real estate report. Based on the report, activity is strong in all real estate sectors. However, the affordability for single-family homes is down, while housing development is up, which should balance the Phoenix housing market in the near future. And because it is affordable compared to other major population centers, Phoenix is actually one of the best places to invest in real estate.
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Historical real estate appreciation has placed the Phoenix housing market among the top markets for growth in the US. Since Q1 of 2000, Phoenix properties have experienced a total appreciation of 107% with an average annual growth rate of 3.9% (according to NeighborhoodScout). Zillow forecasts a 5.4% appreciation of local property values over the next year. So, buying a Phoenix investment property now - while it’s affordable - will be a smart move and will allow you to enjoy appreciation in the coming years.
Real estate investors should keep in mind that the Phoenix real estate market is currently a hot seller’s market. This is mostly due to the tight housing inventory which most major cities across the US are suffering from. Still, property prices have not been driven up to unaffordable ranges, which makes the market a great entry point for beginner investors nonetheless.
Because the city sees so many tourists annually, it’s no surprise that Airbnb growth is massive in the Phoenix housing market. Airbnb Phoenix hosts received the highest number of guests in the state in 2016, bringing in a revenue of $4,112,000.
Luckily, Airbnb real estate investors can benefit from this rental strategy in the city as the practice of renting out non-owner occupied properties is legal in Phoenix. In fact, Arizona Airbnb regulations state that all local municipalities must allow short-term rentals and place no limit on the number of Airbnb investment properties an investor can own and operate in the city. There is also no cap on the number of days an Airbnb rental property can be occupied by guests, which is a common regulation in many cities across the US.
As an Airbnb hosts, you may have to apply for a license depending on your Airbnb rental property listing, so make sure to check with the city codes. Airbnb and other vacation rental websites are responsible for collecting taxes on bookings and remitting them to the state. Keep in mind that while the practice is legal, Homeowners Associations may still legally ban short-term rentals in their complexes.