Where to Invest in the Phoenix Real Estate Market Right Now

The Phoenix real estate market is one of the top markets offering lucrative investments. Plus, it has a large population and a thriving economy.

Phoenix is one of the hottest real estate markets in Arizona and even across the US. Whether you’re planning to invest in long term or short term rentals in 2023, you’ll find various opportunities in Phoenix. Investors who plan to invest in the Phoenix real estate market in 2023 will find several affordable housing options if they know where to look.

Table of Contents

1. Phoenix Real Estate Market 2022: City-Level Statistics 
2. Reasons to Invest in the Phoenix Real Estate Market in 2023
3. Best Neighborhoods in the Phoenix Real Estate Market for Long Term Rentals
4. Best Neighborhoods in the Phoenix Real Estate Market for Short Term Rentals

Phoenix is home to more than 1.6 million residents, and its population is continuously rising. One of the reasons for its growing population is its thriving economy and plenty of job opportunities with a generally low cost of living. What’s more, it enjoys favorable weather conditions and offers several recreational activities and entertainment avenues. 

Investors who plan to venture into long term rentals in Phoenix real estate will find several opportunities to rent to new and existing residents. According to Mashvisor’s real estate data as of December 2022, Phoenix offers a high price to rent ratio of 22. It means that more residents find renting a home to be a more practical option than buying their own. 

Phoenix is also one of the most frequently visited tourist destinations, making it a great place for investing in short term rentals as well. If you plan to buy vacation homes for sale, investing in Phoenix can let you earn an average monthly income of around $2,520.

Phoenix Real Estate Market 2022: City-Level Statistics

Before deciding to buy an investment property in Phoenix, you need to know how it performed in 2022. According to Mashvisor’s real estate data and trends, Phoenix is one of the best locations for investing in rentals. It is because of its high price to rent ratio and favorable cash on cash returns on both long term and short term rentals. 

Here is Mashvisor’s Phoenix real estate data as of December 2022:

• Median Property Price: $572,247
• Average Price per Square Foot: $315
• Days on Market: 11
• Number of Long Term Rental Listings: 2,694
• Monthly Long Term Rental Income: $2,214
• Long Term Rental Cash on Cash Return: 2.97%
• Long Term Rental Cap Rate: 3.01%
• Price to Rent Ratio: 22
• Number of Short Term Rental Listings: 2,011
• Monthly Short Term Rental Income: $2,520
• Short Term Rental Cash on Cash Return: 2.28%
• Short Term Rental Cap Rate: 2.31%
• Short Term Rental Daily Rate: $201
• Short Term Rental Occupancy Rate: 46%
• Walk Score: 34

Long Term and Short Term Rentals

The Phoenix real estate market is excellent for investing in long term rentals because of its high price to rent ratio. A high price to rent ratio indicates that the housing prices in the city are higher compared to the rental rates. It means that it’s more practical for residents to rent a home instead of buying their own house, making the market is best for long term rental investors.

In addition, Phoenix is also a lucrative market for short term rentals. Short term rental owners get to earn an average cash on cash return of 2.81%, which is not bad considering that Phoenix is a big and progressive city. The cash on cash return is a rate of return that takes into account the amount of cash invested, as well as the method of financing. 

Moreover, since Phoenix is home to wonderful tourist attractions, there’s no doubt that it welcomes a number of visitors in a year. As a result, it sees a good occupancy rate. In fact, the short term cash on cash return in Phoenix is 2.28%, which is also a good rate considering the city’s high property appreciation rate.

Related: 5 Best Ways to Invest in Real Estate in 2023

Now the question is, “Does Phoenix have the same positive forecast in 2023?”

5 Reasons to Invest in the Phoenix Real Estate Market in 2023

Despite the projected potential housing crash in 2023, real estate remains a profitable venture especially if you know where to invest. We’ve established that Phoenix real estate is a profitable market for investment. There are a multitude of reasons why real estate investors should consider investing in the Phoenix real estate market in 2023. 

Here are five reasons why you should invest in the Phoenix real estate market:

1. Cash Flow

The bread and butter of any rental property is rental income. If you plan to purchase Phoenix investment properties, there are plenty of opportunities for generating generous rental income. According to Mashvisor, the average rental income for both long term and short term rentals are $2,214 and $2,520, respectively.

The cash on cash return is also reasonable for both investment strategies, at 2.97% for long term rentals and 2.28% for short term rentals. It’s important to note, however, that the said figures are only averages. Real estate investors can find a Phoenix investment property that generates more money in terms of rental income and ROI. 

It’s also worth noting that it’s essential to find the best investment property to maximize the benefits of being a Phoenix real estate investor. Make sure to find an income property that can generate positive cash flows to ensure that you’re taking more profits. To help you find the best investment that generates the highest returns, you can use Mashvisor’s Property Finder.

2. Home Appreciation

A Phoenix investment property is the gift that keeps on giving. Not only does a Phoenix real estate investment generate rental income in profit, but it also appreciates at high rates. According to NeighborhoodScout, the Phoenix real estate market has appreciated 240.86% in value since the year 2000, with an average annual appreciation rate of 5.60%.

Relative to the Arizona real estate market, the Phoenix real estate market boasts an appreciation rate that is higher than half of the state’s cities and towns. As an investor, looking at the appreciation rate is necessary if you want to know how your property’s value will grow through the years. So, in case you need to sell your property, you know that the value will rise.

3. Affordable Housing Options

Another reason why you should invest in the Phoenix real estate market is that the city offers affordable housing options. The Phoenix median property price is roughly $572,000. While it is more than the national median of $428,700, it is lower than the median property price in the Arizona real estate market, which, according to Mashvisor, is $587,240 as of December 2022.

As an investor, finding an affordable property to invest in is crucial for your profitability. If you spend less on the purchase of your investment property, you’ll see a higher profit margin. Based on Mashvisor’s database, you can find a rental property in Phoenix for as low as $65,000, which is optimal for either short term or long term rental investment.

4. Profitable Long Term Investing

Now, let’s get into rental strategies in the Phoenix real estate market. Long term investing is a great strategy in the city. There is a clear and consistent demand for long term Phoenix rental properties, as 44% of residents rent a property. Plus, the high price to rent ratio is proof that more people find renting a better option than buying their own home.

Also, Phoenix is also experiencing strong economic growth. Over the previous year, the Phoenix job market increased by 3.3%. The job market is on a positive trajectory, as the projected 10-year future job growth is estimated to be 48.2%. The figure is well above the national average of 33.5%. The city’s job market growth is a primary driver for long term residents.

The strong economy is also what drives people to live in Phoenix. To top it all, Phoenix is ranked as one of the best cities in the US to retire. It is also one of the cities with the best public schools.

5. Profitable Short Term Investing

Phoenix vacation rentals are another type of investment that will make you a successful real estate investor. Phoenix short term rental hosts can earn an average of $2,520 in rental income per month. But before you decide to invest in the Phoenix short term rental market, you need to know the answer to a vital question, “Are short term rentals legal in Phoenix?” 

Fortunately, the answer is yes. However, investors need to be aware of a few regulations. For instance, Phoenix short term rental hosts are required to apply for a short term rental license. Also, hosts need to pay three types of taxes, which include a State Transaction Privilege Tax , a City Transient Lodging Tax, and a City Privilege Tax. 

You can learn more about some of the most important short term rental regulations in Phoenix on Mashvisor’s Airbnb Regulations Page.

Phoenix is a good market for long term rental investment. There are several reasons why many people are moving to Phoenix. Its warm weather, beautiful sceneries, strong economy, plenty of job opportunities, and quality of life are what attract people to live in this famous Arizona city. Phoenix is known as the “valley of the sun,” and there’s no wonder why it is a great place to live.

You can learn more about some of the most important short term rental regulations in Phoenix on Mashvisor’s Airbnb Regulations Page.

Related: 5 Best Short Term Rental Sites for Real Estate Investors

5 Best Neighborhoods in the Phoenix Real Estate Market for Long Term Rentals

Here are a few reasons why people are staying in Phoenix for the long term:

Warm Weather All Year Round

One of the top reasons why many people are moving to Phoenix is because of its favorable weather conditions all year round. Phoenix boasts around 300 sunny days per year, which is a dream place for those who want to escape the biting cold of snowy states. In winter, you can enjoy an average low of 47 degrees Fahrenheit, which is not bad compared to other cold cities.

Great Job Opportunities

As mentioned, Phoenix offers one of the highest job market increases in Arizona. With its projected job growth for the next decade, it’s not a surprise that many people are moving to the city to find more career opportunities. Along with plenty of job opportunities comes a strong economy, which is also a good reason why Phoenix is a favorite place to live in.

Convenient Commute

Residents find getting around Phoenix to be pretty simple and convenient. For a big Arizona city like Phoenix, having such light traffic is such a big deal. The easy grid road system, affordable light rail transportation, and bike-friendly commutes are available in the city. Also, residents can use the Valley Metro Transit System to go to downtown Phoenix and surrounding metro areas.

Because of the above reasons, the long term rental market in Phoenix has a positive outlook in 2023. However, before you decide to buy an investment property, make sure to know the best neighborhoods for long term rentals to maximize your profit potential.

Below, we gathered the five best Phoenix neighborhoods for long term rentals for 2023, based on Mashvisor’s real estate data as of December 2022. We considered neighborhoods with median property prices of below $1 million. We also look at those with rental income of $2,000 or higher and cash on cash returns of at least 2%.

Based on the criteria above, here are the best neighborhoods for long term rentals in Phoenix, ranked from the highest to the lowest cash on cash return: 

1. Paradise Valley

• Median Property Price: $602,300
• Average Price per Square Foot: $321
• Days on Market: 11
• Monthly Long Term Rental Income: $3,458
• Long Term Rental Cash on Cash Return: 4.54%
• Long Term Rental Cap Rate: 4.59%
• Price to Rent Ratio: 15
• Walk Score: 44

2. Maryvale

• Median Property Price: $361,971
• Average Price per Square Foot: $241
• Days on Market: 9
• Monthly Long Term Rental Income: $2,092
• Long Term Rental Cash on Cash Return: 4.47%
• Long Term Rental Cap Rate: 4.54%
• Price to Rent Ratio: 14
• Walk Score: 52

3. Estrella

• Median Property Price: $386,936
• Average Price per Square Foot: $240
• Days on Market: 14
• Monthly Long Term Rental Income: $2,093
• Long Term Rental Cash on Cash Return: 4.11%
• Long Term Rental Cap Rate: 4.17%
• Price to Rent Ratio: 15
• Walk Score: 13

4. Alhambra

• Median Property Price: $454,022
• Average Price per Square Foot: $269
• Days on Market: 10
• Monthly Long Term Rental Income: $2,278
• Long Term Rental Cash on Cash Return: 4.02%
• Long Term Rental Cap Rate: 4.08%
• Price to Rent Ratio: 17
• Walk Score: 37

5. Laveen

• Median Property Price: $428,984
• Average Price per Square Foot: $233
• Days on Market: 8
• Monthly Long Term Rental Income: $2,321
• Long Term Rental Cash on Cash Return: 3.93%
• Long Term Rental Cap Rate: 3.98%
• Price to Rent Ratio: 15
• Walk Score: 15
  

Start searching for a profitable long term rental property in Phoenix using Mashvisor’s Property Search tool.

5 Best Neighborhoods in the Phoenix Real Estate Market for Short Term Rentals

Another strategy that’s best for the Phoenix real estate market is investing in short term rentals. In general, Phoenix is one of the top tourist destinations in Arizona. There are plenty of reasons why investing in Phoenix vacation rentals for sale is a good idea. A few of these reasons include its various recreational activities and beautiful naturalPhoenix Real Estate Market: Where to Invest | Mashvisor sceneries.

According to an article from Zumper, more than 19 million people visit the Phoenix metropolitan area each year. Visitors from across the country and all over the world love the warm weather conditions, as well as Phoenix’s fabulous dining experience and outdoor fun activities. Overall, the real estate forecast and outlook for the Phoenix short term rental market are promising.

Related: 7 Tips to Avoid a High Rental Vacancy Rate

Here are a few reason why you should consider investing in Phoenix short term rentals in 2023:

Plenty of Outdoor Activities

If you want to score from tourists who love the great outdoors, investing in Phoenix vacation rentals is definitely the best idea. With its sunny weather and mountainous desert terrain, Phoenix is a great place for fun and adventurous activities. Tourists can choose among hiking, cycling, mountain biking, fishing, tubing, rock climbing, and horseback riding. 

Rich in Arts and Culture

Phoenix boasts an excellent share of arts and culture, including ballet, the symphony, plays, and musical theater. Tourists wanting to get a taste of Phoenix’s rich culture and arts will enjoy a variety of attractions. They include the Arizona Opera Company, Scottsdale, Ballet Arizona, Phoenix Art Museum, Arizona Capitol Museum, and Arizona Science Center, to name a few.

Vibrant Nightlife

Another reason why Phoenix is a great location for vacation rentals is because of its active nightlife. The city is home to several nightclubs, cocktail bars, comedy clubs, dive bars, and lounges. Phoenix’s vibrant nightlife is one of the reasons why visitors love to go to the city. If you buy vacation rental property, you may want to choose somewhere close to such places.

When investing in the Phoenix short term rental market, finding the right location is crucial. After all, your location can either make or break your investment. To help you find the most optimal neighborhoods for Phoenix short term rentals, we used Mashvisor’s data as of December 2022 and selected the top five areas for vacation rentals.

We only included neighborhoods with a median property price of below $1 million and earn an average of $2,000 rental income per month. We also took into account the cash on cash return, which must not go below 2%, as well as the occupancy rate, which must be 40% or higher. 

Based on the above criteria, here are the best neighborhoods for short term rentals in Phoenix, arranged from those with the highest to the lowest cash on cash return:

1. Deer Valley

• Median Property Price: $518,582
• Average Price per Square Foot: $283
• Days on Market: 10
• Monthly Short Term Rental Income: $3,230
• Short Term Rental Cash on Cash Return: 3.87%
• Short Term Rental Cap Rate: 3.92%
• Short Term Rental Daily Rate: $169
• Short Term Rental Occupancy Rate: 46%
• Walk Score: 24

2. Central City

• Median Property Price: $428,231
• Average Price per Square Foot: $373
• Days on Market: 8
• Monthly Short Term Rental Income: $2,082
• Short Term Rental Cash on Cash Return: 3.16%
• Short Term Rental Cap Rate: 3.21%
• Short Term Rental Daily Rate: $141
• Short Term Rental Occupancy Rate: 49%
• Walk Score: 23

3. South Mountain

• Median Property Price: $447,974
• Average Price per Square Foot: $270
• Days on Market: 18
• Monthly Short Term Rental Income: $2,480
• Short Term Rental Cash on Cash Return: 2.76%
• Short Term Rental Cap Rate: 2.79%
• Short Term Rental Daily Rate: $137
• Short Term Rental Occupancy Rate: 57%
• Walk Score: 46

4. Alhambra

• Median Property Price: $454,022
• Average Price per Square Foot: $269
• Days on Market: 10
• Monthly Short Term Rental Income: $2,204
• Short Term Rental Cash on Cash Return: 2.61%
• Short Term Rental Cap Rate: 2.65%
• Short Term Rental Daily Rate: $163
• Short Term Rental Occupancy Rate: 44%
• Walk Score: 37

5. North Mountain

• Median Property Price: $471,995
• Average Price per Square Foot: $272
• Days on Market: 10
• Monthly Short Term Rental Income: $2,263
• Short Term Rental Cash on Cash Return: 2.35%
• Short Term Rental Cap Rate: 2.38%
• Short Term Rental Daily Rate: $174
• Short Term Rental Occupancy Rate: 45%
• Walk Score: 53

If you’re ready to find the best short term rental property in Phoenix, use Mashvisor’s Property Search tool to begin your quest.

The Bottom Line: Invest in the Phoenix Real Estate Market Today

The Phoenix real estate market is one of the top markets for US real estate in 2023. With high profitability, relative affordability, and success with both long term and short term rentals, the Phoenix market has what it takes to appeal to all types of investors. Don’t forget, however, that choosing the right location is crucial to your profitability and success as an investor. 

When finding the right location for your rental investment, it’s important to study the local market by researching and analyzing the real estate data and trends. A few of the important metrics that you should find out are the cap rate, cash on cash return, occupancy rate, rental income, and estimated expenses. They can help you make an informed investment decision.

It’s best to use a real estate analytics service like Mashvisor to get all this information in just a few minutes. With Mashvisor’s rental property analysis, you’ll definitely know which areas are optimal for the kind of investment strategy that you are planning to take. Also, Mashvisor provides access to investment property calculator so you can check its profitability.

Mashvisor’s rental property calculator is ideal for those who are not sure whether the property they are eyeing will make a good investment or not. The tool allows investors to get an overview of the essential figures that will help them with their decision-making. Also, the calculator is interactive, which means investors can input their own figures to get a more accurate result.

Experience how Mashvisor can help you find the best rental property in Phoenix. Schedule a demo now.