Phoenix is a booming real estate market with plenty of opportunities for buyers looking to acquire a new investment property. However, just because a property seems like a good deal on paper, there are other things you must consider when deciding if it will be a good investment.
One thing to always keep in mind is that buying investment property is just that – an investment. It’s easy to get attached to a property because you simply like it or the purchase price seems like such a great deal that you must have it.
But buying an investment property in Phoenix needs to be done with careful consideration. Not only about the rental property itself, but also how you plan to consistently generate positive returns from your investment.
What Makes a Rental Property a Good Investment?
Of course, factors like the 1% rule, the amount of budget you have, and how you plan on financing the property are of primary importance. But smart property investors in Phoenix go beyond the numbers to fully understand the whole picture.
Below are some fundamental features of profitable investment properties in Phoenix that can mean the difference between getting a great deal or a great deal of regret.
1. The Right Location for Your Goals
As you already know, location is an incredibly important factor when it comes to choosing profitable investment properties in Phoenix. This is because, while the rental property itself should be attractive and well-maintained, the surrounding area can often be the deciding factor in whether a person is willing to sign a lease or not.
Properties located in desirable areas will often attract more interest and higher rent, thanks to the convenience, amenities, and safety that come with living in a popular, desirable neighborhood.
Knowing the right areas to buy an investment property in Phoenix isn’t always clear-cut, though. Having local knowledge or talking to an experienced property manager can help identify lesser-known locations that are poised to become real estate hotbeds.
2. Low Property Taxes
At 0.64%, Maricopa County in Arizona ranks far below the national average (0.99%) in terms of property taxes.
This means that, compared to the national average, you’d pay about $1,400 a year more in property taxes for a property valued at $400,000 (slightly below the current average home price in Phoenix). As the property appreciates, the gap between what you might pay elsewhere will continue to grow.
Over the course of 10 years, even without accounting for appreciation, you could end up paying $14,000 more in property taxes.
As another example, if you bought a $400,000 investment property in Austin, TX, (1.95%) you’d pay $78,000 over 10 years. That’s more than $50,000 more than you’d pay if you bought your property in Phoenix!
That’s why understanding how much you’ll have to pay in property taxes is an important component of finding a profitable investment property.
3. Neighborhoods with Low Vacancy Rates
Low vacancy rates are an indication that an area is highly sought after by tenants. This increases competition among tenants which can mean being able to charge higher rents. It also reduces the chances you’ll go without tenants for an extended period of time.
Another way to ensure you don’t go an extended period without tenants is to hire an experienced property manager. At Brewer & Stratton Property Management, our vacancy rate is less than 2% across nearly 2,000 units that we manage.
4. Desirable Amenities for Rental Properties
People looking for a house to rent usually have a list of must-have amenities they’re looking for. If the rental property you’re considering doesn’t have them, then you might look for a different opportunity. Or, add the cost of adding certain amenities to what you expect to spend upfront.
Amenities that quality tenants often look for (and that can help you make more money) in single-family rental properties include:
- A washer and dryer
- An outdoor patio or balcony
- Extra storage space
- High-quality home appliances
- An updated kitchen and bathroom
- Versatile flooring
- Space for pets
- Advanced security features
- Nice curb appeal
Finding a good deal on an investment property that already has these features is great. But paying a lower price upfront and then budgeting to add these features is also good.
If you’ve already found a good location with a low vacancy rate, competition for tenants might be pretty high, and investing in adding some desirable amenities to your rental property will likely pay off big in the long term.
5. A Climate that Attracts Renters
The Arizona real estate market is going strong as more and more people are moving from colder climates to experience the sunshine and year-round great weather the state has to offer. It is known as the Sunshine State, after all.
So if you’re looking to buy an investment property in Phoenix, then you’re already focused on an area with a climate that attracts new residents.
6. Thriving Job Market
There’s no question that the job market in Phoenix and surrounding areas in Maricopa County is absolutely thriving. Not surprisingly, Phoenix real estate is often noted as one of the fastest-growing markets in the United States.
With a steady influx of new residents and booming job growth, Phoenix offers real estate investors an excellent opportunity to find highly-profitable investment properties. This also means property values in the Phoenix metro area are likely to increase at a steady rate overall, despite short-term drops in the real estate market.
7. A Great Local Property Management Company
Choosing the right Phoenix investment property to acquire is just the beginning of successful real estate investing. It also takes:
- Consistently finding and screening potential tenants
- Selecting the best tenants in accordance with all laws
- Collecting rent every month
- Responding to tenant maintenance requests
- Inspecting and taking care of the property
- Managing tenants and handling complaints
- Keeping your property and operations legally compliant
- Rental property accounting and tax preparation
Sounds like a lot, right? Well, that’s why so many successful property owners and real estate investors in Phoenix work with a property manager to establish, stabilize, and maximize the rental income from their real estate investment.
The Best Property Management Company in Phoenix
At Brewer & Stratton Property Management, we’ve been helping everyone, from accidental landlords and those buying their second rental property to seasoned real estate investors with an extensive portfolio, succeed in the world of real estate investing for nearly two decades.
Partnering with a proven and reliable property manager in Phoenix is perhaps the most important component of making sure your investment properties are profitable.
If you’re looking at investment properties in Phoenix and have questions about the local real estate market, we can answer any questions you have.
Contact us today to gain valuable local insights from experienced Phoenix property managers who are also successful real estate investors.
Check out this article if you’d like to learn more about improving the long-term success of your investment property.