US News ranked Phoenix #40th Best Place to Live and 140th Best Place to Retire. There’s no question the city’s all-year warm weather had something to do with it. While many other places boast of sunny climes, only Phoenix has a unique combination of dazzling desert, hiking trails, sporting events, arts, shopping and nightlife all rolled into one. Investing in short-term rentals in Phoenix AZ is a great idea, and we’ll tell you why right here.
Phoenix is a paradise and refuge for millions of North Americans wishing to escape cold winters each year. The real estate market here is red-hot, and investors have been snapping up homes. Here’s why:
While many factors affect a market’s appeal, two leading drivers are the high price-to-rent ratio and double-digit rent growth. The home prices in a given town, in relation to the rental costs, drive the market significantly. When rents become higher compared to the home prices, the market becomes more attractive. That’s according to Realtor.com’s chief economist Danielle Hale, speaking to Arizona’s business news organization, AZBigMedia.
And it’s what’s been happening in Phoenix. Over the past year, the city had a 26% price-to-rent ratio and a 23% rent price increase. But with home prices at a 32.35% year-on-year increase, it makes better sense for residents to rent rather than buy homes.
Last year, the rental market’s vacancy rate fell to 3.8%, the lowest in 20 years.
As the economy reopened and travel restrictions were lifted across the United States, tourism rebounded and migrants moved in from other states. Rent prices of all types of accommodation spiraled. In January this year, the average rent for a studio apartment in Metro Phoenix increased by 7%, reaching an all-time high of $1,145. One-bedroom apartments jumped by 2% to $1,275.
While developers continue to construct new apartments across the city, demand continues to rise and outpace supply. Rents are expected to increase again by 7.2% this year, pushing the average rent price up to $1,338 per month.
While home prices rose across the country last year, Phoenix ranked first among all major metro areas. The median listing for a home in Phoenix in November 2020 was $417, 500. A year later, it was just under $485,000.
And it doesn’t look like things will be slowing down. Experts estimate inflation to hover around 3% this year, while average home prices in the greater metro are expected to jump to about $500,000 this year.
Real estate has always been a smart way to invest and protect one’s cash from rising inflation. If you’re looking to invest in short-term rentals, there’s no better place to look than in the Valley of the Sun.
Phoenix is literally a boomtown. It’s been the fastest-growing big city in the United States in the past decade, growing at 11.2%. It’s the only one among the 10 largest US cities posting double-digit growth from 2010 to 2020.
The current metro area population of Phoenix is now at 4.652 million, rising 1.6% since 2021.
The city has already surpassed Philadelphia as the nation’s 5th biggest population in the country.
And with remote work becoming the norm after Covid-19, more people have streamed in. In-bound migrants, retirees, corporate workers, and middle-class families from coastal states have been relocating here, looking for lower taxes, more affordable housing and lower cost of living.
College students are also in the mix. Metro Phoenix is home to more than 40 universities and educational institutions, including Arizona State, Northern Arizona University, University of Arizona and Maricopa Community Colleges.
While other Sun Belt cities are hotspots for migration, Phoenix was the most popular destination last year, followed by Dallas and Orlando. The Valley welcomed roughly 85,000 new residents from other metro areas in the country in 2021.
Californians top the list of migrants in Phoenix. In 2019 alone, some 60,000 Californians made Arizona their new home.
Phoenix ranks No. 2 among the top 5 best-performing labor markets in the country. Not only that — it’s also creating more and more high-paying jobs.
Out of large metros in the US, the Valley had the second-highest increase in 6-figure jobs in 2020, at 217.1% – next only to Nashville at 270.9%.
It’s because tech companies have been relocating here, lured by low taxes and the strong talent pool. Companies like Lucid and Nikola Motors, Weebly, Gainsight and Silicon Valley Bank have set up operations in the Valley.
And more are coming. The Greater Phoenix Economic Council says 1 in 3 Californian companies have been considering relocating to Arizona since 2020.
Last year, Taiwan Semiconductor Manufacturing Company began construction of its $12 billion computer chip manufacturing facility, promising an estimated 1,600 jobs. It plans to build as many as 6 factories over a 10- to 15-year span.
While the top-paying jobs are found in the professional, scientific and technical services sectors, other industries that are driving employment are health care, retail trade, accommodation, construction, manufacturing, and education.
Future job growth over the next 10 years is predicted at 48.2%, higher than the US average of 33.5%.
Read also: The Best Markets to Invest in Airbnb — 5 Important Criteria to Use
The sun shines on Phoenix 300 days of the year every year. That’s more than any other major metro area in the U.S.
People love it here because there’s never any snow to shovel during the winter.
Plus, the cost of living in the Valley is 2% lower than the national average, and the cost of goods and services – including housing – is 4% lower than the US average.
Niche.com gave this city an A- for livability and ranked it #19 best place to live in the United States. Phoenix got top scores for weather, diversity, nightlife, outdoor activity, health & fitness, and commute.
The Valley is home to 4 major professional sports leagues, and residents are just a short drive from countless nature trails. Those include Echo Canyon Trail, Lookout Mountain Preserve, Camelback Mountain, Piestewa Peak, and the Phoenix Mountains Preserve .
Many families and young professionals live in Phoenix. The public schools are above average, and two acclaimed hospitals are located in the metro area: the Mayo Clinic and Banner Boswell Medical Center.
Additionally, Phoenicians tend to have moderate political views.
Aside from in-migration, another factor driving the influx to Phoenix is tourism. The Valley is a popular destination for its nightlife, shopping, performing arts, sports stadiums, parks, museums and outdoor recreation.
It boasts 185 golf courses, and the city is within a little over an hour’s drive from 6 lakes.
Greater Phoenix is home to one of the largest municipal parks in North America, South Mountain Park. Sprawled over 16,000 acres, it offers 50 miles of hiking, biking and horse trails.
And of course, the state of Arizona is home to the Grand Canyon, Horseshoe Bend and Antelope Canyon.
Every year, millions of visitors descend on this valley for rest and recreation. In 2019, over 19 million tourists were recorded including those on day trips and overnight stays, as well as 1.5 million international travelers.
The estimated direct spending generated by these visits amounted to more than $3.9 billion in revenues. Tourism sustains 8.7% of all the jobs in the Phoenix area.
Many of the Valley’s visitors are actually retirees and snowbirds from across the northern United States and Canada. According to Arizona’s Office of Tourism, 1 million Canadian tourists accounted for $1 billion in spending in 2019. Those numbers plunged in 2020 because of Covid-19.
But since borders reopened last November, and with pent-up travel after nearly 2 years of restrictions, Canadian tourists are back with a vengeance this year.
It’s also worth noting that more than 40 million people are within a day’s drive of Phoenix, including folks from nearby an Diego, Los Angeles, Las Vegas and Albuquerque.
Want to know the best part? Many of these visitors choose to stay short-term rentals rather than hotels. That’s because STRs provide the privacy, amenities, comforts and affordability that most hotels can’t. Guests usually go on extended stays, averaging 8.4 days.
Read also: Best Markets for Airbnb: The 10 Hottest Places (Plus 3 Sleeper Sites You Never Expected)
If you’re on the hunt for properties to rent short-term, look in no other place. Keyword searches for the term “Airbnb Phoenix” is at 14,000 to 15,000 which shows just how many people are interested in staying at short-term rentals in Phoenix at any given time.
And according to Airbnb, the city is a jackpot for short-term rental owners, especially those hosting for the first time on their platform. They said the Valley was the 3rd most profitable area for new hosts for the first half of 2021. Collectively, these Airbnb hosts earned $6.3 million.
Interested? We can help you start, manage and grow a short-term rental business in Phoenix for you. Our online course will teach you how to automate your operations so you can run things more efficiently and have more time and money freedom for yourself.
Or, we can do all the heavy lifting for you. Our property management company, Cohostit, provides turnkey management services – from marketing to optimization to issue resolution – and everything in between. Click here to see if you qualify.
Read also: 13 Simple Ways to Boost Your Short-term Rental Income This Summer
