If you are considering investing in a vacation rental property, the first thing you will need to decide is where you are going to invest. After all, when compared to all other factors, location is the most important force in determining the value of property.
Investing in an Arizona vacation rental property is one of the easiest ways to earn a passive income. With the right property—and the right vacation rental property management team—you will be able to earn steady cash flows in addition to increasing the equity you own in your home.
When compared to the stock market (S&P 500), real estate property has traditionally been a much more stable source of income. Though there is no denying that the real estate market experiences occasional down points (such as the 2007 and 2008 recession), property’s uniquely finite nature causes the demand for property to generally be increasing in demand over time. As a result, property prices can be expected to generally increase in value as well.
If you are considering investing in a vacation rental property, the first thing you will need to decide is where you are going to invest. After all, when compared to all other factors, location is the most important force in determining the value of property. For example, it is not uncommon for a 1,000 square foot apartment in Manhattan to cost significantly more than a 4,000 square foot mansion in a rural area.
Generally speaking, there are quite a few reasons why the Arizona vacation rental property market has become especially attractive. This is particularly true in Scottsdale, which is one of the fastest-growing communities in the state. In this article, we’ll take a close look at why so many property investors are taking a look at the Grand Canyon State.
1. Population growth
As suggested, one of the surest metrics for determining whether a property will increase in value is population growth. Between 2010 and 2019, the population of Arizona increased by an estimated 13.9 percent, making the state the 6th fastest growing in the nation. As the nation’s population continues moving south and west, southwestern states—such as Arizona—can be expected to continue enjoying a population increase.
2. Relatively low cost of living
Arizona is in the top half of states by affordability. However, while the state’s 24th place ranking may seem “mediocre” to some, it is important to note that the state is more affordable than nearby Utah and much more affordable than bordering states California and Nevada. The combination of manageable living expenses along with an increasing population creates a unique long-term opportunity for those interested in investing in vacation rental properties.
3. High-quality vacation property management companies
In order to succeed as a vacation property owner, you will likely need to choose a reliable property management team. Fortunately, there are many high-quality Arizona vacation property management companies available to choose from. These companies can help with a wide array of responsibilities including marketing, interacting with guests, cleaning the property, helping with taxes and legal needs, and many others.
4. Warm weather, year-round
Phoenix is the warmest metropolitan area in the United States and, along with Miami, is among the only metropolitan areas that are consistently above 50 degrees every day over the course of the year. While the summer extremes are undesirable to some, Phoenix’s ample amounts of sunshine and warm weather give it a wider range of days that are appealing to vacationers. Unlike a property in, say, Minneapolis, renting your Arizona vacation in January should be very easy.
5. Popular vacation destination
With the Grand Canyon, excellent golf courses, and the fifth-largest city in the nation (Phoenix), there are plenty of reasons why people across the world flock to Arizona every year. In fact, Arizona is the 8th most visited state in the nation. California is the only state in the western region that attracts more visitors each year, but when you adjust for population differences, Arizona actually overperforms. This is great news for vacation property owners.
6. Wide variety of investment opportunities
Arizona’s unique landscape and population distribution have helped cultivate a very wide variety of possible property investment opportunities. Whether you are looking to invest in a vacation home in Scottsdale with a private pool or a cabin near the Grand Canyon, you are going to find plenty of options. You’ll also find that there are many different price points in this region, meaning that your investment strategy can be quite flexible.
7. Low property taxes
Property taxes are one of the pitfalls of owning a vacation rental property, but fortunately for Arizona property owners, these taxes are comparatively low. The typical Arizona property tax, after adjustments, ranges from 0.87 percent to 1.5 percent of the property’s market value. The average rate of 1.3 percent means that a property valued at $200,000 can expect to pay about $2,600 in property taxes (a little over $200 per month). This is much lower than the rate in New Jersey, for example, which currently has the highest taxes in the nation.
8. Proximity to Las Vegas, California
Relatively speaking, Arizona is quite accessible from both Las Vegas and Los Angeles, which has helped fuel the growth of the vacation property market. In fact, many people visiting Las Vegas will also visit the Grand Canyon, which in turn places upward pressure on the average value of vacation properties.
9. Low heating bills
While Arizonans will need to pay higher than average rates for air conditioning (due to the warm climate), their often non-existent heating bills will enable them to save a considerable amount of money over the course of the year. It costs more to heat a property than to keep it cool, which is a major advantage for property owners in warm climates.
10. High amount of repeat visitors
Lastly, one of the best things about owning property in Arizona is that many visitors to this state plan to visit on an annual basis (and will often stay for a considerable amount of time). The legend of the “Arizona snowbird” is well known throughout the state. By being able to attract repeat visitors, you will be able to create a much more reliable stream of passive income.
Conclusion – Arizona vacation property market
While arguments can be made for buying property in almost every state, it is clear that Arizona remains near the head of the pack. Because of each of the ten reasons mentioned above, investing in Arizona vacation properties can be an especially lucrative investment.
