Rental prices in the Phoenix metro, like home prices, are skyrocketing- making it challenging for people to find housing across the board. Parallel with the housing market — there are fewer rentals available and too many people who want them. As I like to say, “The only market in Phoenix tighter than the residential resale market is the rental market.”
If you’re looking to buy rental property in the Valley of the Sun, you’ll find this story useful as we look at what’s happening in the market and how you can find your investment footing in one of the country’s fastest-growing cities.
The Red-Hot Rental Market
Recent data from Zumper shows Scottsdale, a sprawling city in the greater Phoenix metroplex, is the tenth most expensive market in the country. The report shows that in September, the median rent for a one-bedroom apartment in Scottsdale rose to $1,850 – a 24% increase over a 12-month period.
In fact, Zumper reports that much of the Phoenix metro has experienced rent surges over the last year.
2020-2021 Year over Year Rent Growth
Source: Zumper National Rent Report
Housing Market Flooding the Rental Market
What was once considered a sleepy western town, Phoenix is now one of the fastest growing cities in the nation. Droves of new residents boosted Phoenix’s population by over 20% in the last 10 years. The pandemic further induced the metro’s population boom, turning an affordable city into what’s becoming one of the most expensive housing markets in the country.
Latest data from the Cromford Report shows the monthly median sales price for a single family home in the Phoenix area now sits at $410,000 versus $326,800 this time last year – a 25% increase.
In this seller’s market, there is not enough supply to meet demand, pushing would-be traditional homeowners to become temporary or permanent renters. With that said, the rental market is hitting a breaking point as those homeowners compete with traditional renters for housing.
In Maricopa County, there is a 97% percent occupancy rate on rentals – the highest rate in 50 years. The Arizona Multi-Housing Association reports it expects to build up to 12,000 units by the end of this year, with the same amount also in the works for 2022, which is still far below the demand for such housing.
Recent Cromford analysis also states that iBuyers, property flippers and investors are making most of the property purchases as of late instead of folks who’d buy their own home and live in it. This indicates more competition between rental property buyers as many see purchasing rental properties as a solid investment opportunity in a rapidly growing city.
Opportune Areas to buy Rental Property in the Phoenix Metro
If you’re a potential rental property owner and are unsure of which neighborhoods will give you the most bang for your buck, look no further than our list below. There are hundreds of sprawling neighborhoods across the Phoenix metro that offer a reasonable cost of living with elite schools, outdoor activities, convenient shopping and dining. Some budget-friendly options include:
Arcadia Lite & Lower Arcadia
These two neighborhoods are bustling with new housing and commercial developments. A popular draw for millennials and younger families, there are plenty of parks, shops and restaurants for everyone to enjoy.
Average 1-BR rent: $1,771
In the East Valley, Gilbert is a vibrant community filled with young professionals and families, and it’s a great place for those in or near retirement age. The area is also home to nationally ranked schools, and CNN recognized Gilbert as one of the best places to live.
Average 1-BR rent: $1,781
Conveniently nestled near the suburbs of Gilbert, Tempe and Chandler – Mesa is known for its top rated schools, outdoor recreation, golf courses, in-demand restaurants and a trendy art scene.
Average 1-BR rent: $1,383
A suburb in the West Valley, Avondale is an outdoor enthusiast’s paradise and is within proximity to some of the best parks, shopping and dining. Avondale is home to ISM Raceway, which hosts two NASCAR races a year, drawing motorsports enthusiasts from around the country.
Average 1-BR rent: $1,493
East of downtown Phoenix, the Garfield Historic District is experiencing a renaissance. A decades-long revitalization of the historic district is transforming the neighborhood with new restaurants, businesses and parks. Plus, the area is conveniently located to some of downtown Phoenix’s best restaurants and bars.
Average 1-BR rent: $1,045
For more information on some of the best places to live in the Phoenix metro, read here.
Tips on Finding Phoenix Rental Property
Start your search for rental property at least a few months in advance, if possible, especially in a place like Phoenix where there isn’t a lot of inventory. There’s typically less competition in the first part of the month while the latter part of the month is the busiest.
Use Online Apps
Online apps and websites are a great place to start your search. Sites like Realtor.com, Rent.com, Zillow and others give a good general overview of listings in the areas that you can buy as investment properties. They offer several filters to help you tailor your search to your preferences, but they still aren’t as strong as our next tip.
Enlist a Real Estate Agent
A licensed realtor is your best advisor and will know the neighborhoods where your desired rental property has the ability to have a strong return on investment over time. A realtor can make sound recommendations that align with your expectations, saving you a lot of time in the long run. It’ll help to find a realtor who has experience dealing with investment properties.
Trevor H. Halpern, J.D. is the No. 1 independent agent at Phoenix-based North&Co. and the founder of the Halpern Residential real estate group. As a Phoenix native, Halpern’s deep knowledge of both people and property has allowed him to create client success in all areas of town. As a graduate of ASU’s College of Law, Halpern prides himself on delivering high-level strategy, efficient negotiations and precise tactical execution. Since 2011, Halpern has sold over $100 million in real estate and has been in the top 1% of real estate agents in the Greater Phoenix Metropolitan Area since 2016.