Is Buying a Scottsdale Investment Property a Smart Choice?

Are you looking for a new income property to purchase in 2017? Are you tired of trying to find decent and affordable rental properties in the hot and thus overpriced markets? Then you should think about buying a Scottsdale investment property. Let’s look at the most important features of the Scottsdale real estate market.

Scottsdale Real Estate Market

Before you can decide whether to go for investing in Scottsdale real estate, you need to know the key characteristics of the market, in order to make an informed investment decision. In a couple of words, the Scottsdale real estate market is well balanced. Nearly 5,000 single-family homes were sold in Scottsdale in 2016, which is an increase of 2.9% from the previous year. The median sold price for single-family homes went up by 3.7%, while the average sold price rose by 3.2%. The price range at which Scottsdale real estate investments sold in 2016 was wide: from a minimum of $166,000 to a maximum of $11,110,000. About 7,800 new listings showed up in the market over 2016, and listings stayed on the market for an average of 116 days. These are all signs of a balanced real estate market, which means that Scottsdale real estate market is neither a seller’s nor a buyer’s one. That’s good news for potential future owners of Scottsdale real estate investments as the local market is likely to remain stable, without any surprises over the coming years.

Factors Driving the Scottsdale Real Estate Market

The main factor behind any real estate market is the local economy. If you are thinking about buying a Scottsdale investment property, you will be happy to know that the Scottsdale economy is doing well, actually it’s performing better than the average for the US. The unemployment rate here is 4.4%, compared to 5.2% across the US. The job growth over the past 12 months was 3.2%, compared to an average growth of 1.6%. Meanwhile, the expected job growth for the next 10 years is 41.9%, above the nationwide average of 38.0%. This is important information for someone thinking about investing in Scottsdale real estate. On the one hand, that means that migration driven by new job opportunities will be exerting pressure on the real estate market and pushing prices up for Scottsdale real estate investments. So if you want to buy a Scottsdale investment property, now is the right time before prices go up. On the other hand, not all new migrants will be willing and able to buy a home. Indeed many of them will be looking to rent in Scottsdale, which means that investing in Scottsdale real estate now is the right decision.

Figures for a Scottsdale Investment Property

Before you are ready to buy a Scottsdale investment property, you should perform a careful real estate market analysis in order to get all vital real estate comps. As you know, that takes a lot of time and efforts to collect the necessary data, organize it into spreadsheets, and do the required calculations. Alternatively, you can save all this time and energy by using an investment property calculator like Mashvisor’s. Following are the numbers for a typical Scottsdale investment property which you can obtain within a minute after the beginning of your search at Mashvisor’s rental property calculator:

Median Property Price: $716,000
Traditional Rental Income: $4,000
Airbnb Rental Income: $1,600
Traditional CoC Return: 4.4%
Airbnb CoC Return: 0.9%
Traditional Cap Rate: 7.1%
Airbnb Cap Rate: 3.3%
Airbnb Occupancy Rate: 39.9%

As you can see, affordability is already becoming an issue in the Scottsdale real estate market. The median property price of $716,000 is below the price in hot markets like San Francisco ($1,328,000), Boston ($1,025,000), Los Angeles ($939,000), and San Diego ($828,000) but significantly above the price in other well-doing markets such as Seattle ($656,000), Denver ($560,000), Portland ($506,000), Miami ($494,000), and Houston ($453,000). Markets within Scottsdale’s price range include Oakland ($761,000), Napa ($749,000), and Burbank ($725,000).

A very important investment decision which the data provided by Mashvisor’s investment property calculator can help you in concerns the most appropriate rental strategy in your selected city. While Airbnb is becoming more and more profitable and thus more and more popular in many cities across the US, this is not the case in Scottsdale. For a Scottsdale investment property traditional is the preferable strategy. The expected rental income for traditional is more than twice the value for Airbnb. As a result, profitability as measured both by cash on cash return and cap rate is higher for traditional. However, if you still decide that in your particular case Airbnb might be the better option, you need to be familiar with the existing legislation on short-term rentals before you decide in favor of investing in Scottsdale real estate.

Airbnb Laws for Scottsdale Investment Property

Airbnb Scottsdale real estate investments are fully legal. On 13 May 2016 Governor Doug Ducey signed into law Senate Bill 1350, which prohibited all Arizona municipalities from banning the listing and use of Airbnb and other short-term rental platforms. This new legislation is expected to have a positive effect on short-term rentals across Arizona including in Scottsdale, which means that the trends for an Airbnb Scottsdale investment property might reverse and profitability might surpass this for traditional.

Best Neighborhoods for a Scottsdale Investment Property

Before you can start looking for a specific Scottsdale investment property, you need to know what the right neighborhood for your investment is. Mashvisor’s investment property calculator will be able to help in this decision by providing you with the figures for separate neighborhoods. Let’s look at the two most profitable neighborhoods for investing in Scottsdale real estate:

1. South Scottsdale

Median Property Price: $379,000
Traditional Rental Income: $2,500
Airbnb Rental Income: $1,800
Traditional CoC Return: 5.0%
Airbnb CoC Return: 3.0%
Traditional Cap Rate: 8.1%
Airbnb Cap Rate: 5.9%
Airbnb Occupancy Rate: 42.9%

South Scottsdale is a busy neighborhood offering numerous shopping, eating, and partying options, in close proximity to Old Town Scottsdale. South Scottsdale is much more affordable than the rest of the city, which brings profitability up. Traditional is the better strategy here.

2. North Scottsdale

Median Property Price: $580,000
Traditional Rental Income: $3,400
Airbnb Rental Income: $2,400
Traditional CoC Return: 4.4%
Airbnb CoC Return: 2.0%
Traditional Cap Rate: 7.1%
Airbnb Cap Rate: 4.6%
Airbnb Occupancy Rate: 39.9%

North Scottsdale is another excellent neighborhood for purchasing a Scottsdale investment property. The median property price is below the average for Scottsdale, and profitability is good. If you go for investing in North Scottsdale real estate, traditional is preferable over Airbnb.

In your next search for a rental property, you should consider a Scottsdale investment property. This balanced market offers good investing opportunities.

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