Arizona vs Las Vegas Rental investing

Member since 2020 · 77 posts · 18 votes

BP!

Hope all is well! I’m looking to invest out of state in Phoenix Area or Las Vegas. I’m currently in Cali. I want to see why you would prefer one state to the other. Vegas is a lot closer to me however I feel Phoenix is a lot more stable and growing faster.

Just want to know what some of your thoughts are.

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

I think they’re very compatible.

Also very easy to evict tennants quickly cheaply, no natural disasters, cheap flights, low maintenance newer houses.

No state income tax probably won’t effect you much if your only in AZ state income is rental properties and you deduct the depreciation you’ll probably have a loss.

I go the other way on Doug’s plenty of room to keep building and keep things affordable. We’ve got limited space to help force appreciation as people in Vegas think a 20 mile trip across town is insane. And certainly don’t want to live in the boonies.

I I have 14 rentals, In April 13 paid and one lost their business due to shut down. Finding a replacement tennant took two weeks (the longest in my 20 years) but I got $1900/mo rent up from $1600. in May all paid in full. All of this is SFR. I don't know the Phoenix Small MFR market but it's probably better than Vegas.

I don’t think you can go wrong with either one, and because you’re in Cali, they’re you’re best options. IMHO.

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Doug McVinuaPro Member
Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
6y
@Robin Morales Being based in Phoenix I clearly have a bias, just want to get that out up front!

Why Phoenix:

Jobs and the economy, we are growing at a rapid rate with great diversity in employment sectors. We have large techs like Intel spending billions on fabrication plants, large insurers like State Farm expanding the workforce, and many others that have either recently moved or announced plans to locate significant employment in the Phoenix area.

Arizona Landlord-tenant laws tend to be very fair and by most standards lean towards protecting the landlord. For example, evictions can be generally be accomplished in under 30 days at a cost under $500.00.

We have lots of land to develop and grow, keeping the cost of development reasonable.

Our water allocation is solid and deemed to be dependable with multiple sources.

Arizona has a very low risk of natural disasters such as earthquakes etc.

In the portfolio of properties I manage I currently have zero vacancies, April rents were paid in full by the 9th and May rents were paid in full on the 8th. Yes, I had tenants impacted by COVID but between assistance and even new jobs we were able to get them thought it so far.
Rents have been going up annually and were even strong during the downturn of 2006-2009.
Just a few reasons why I believe in Arizona!!
[email protected]602-751-7577
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
I think they’re very compatible.
Also very easy to evict tennants quickly cheaply, no natural disasters, cheap flights, low maintenance newer houses.
No state income tax probably won’t effect you much if your only in AZ state income is rental properties and you deduct the depreciation you’ll probably have a loss.
I go the other way on Doug’s plenty of room to keep building and keep things affordable. We’ve got limited space to help force appreciation as people in Vegas think a 20 mile trip across town is insane. And certainly don’t want to live in the boonies.
I I have 14 rentals, In April 13 paid and one lost their business due to shut down. Finding a replacement tennant took two weeks (the longest in my 20 years) but I got $1900/mo rent up from $1600. in May all paid in full. All of this is SFR. I don't know the Phoenix Small MFR market but it's probably better than Vegas.

I don’t think you can go wrong with either one, and because you’re in Cali, they’re you’re best options. IMHO.
6 Reply
Robin Morales
OP
Member since 2020 · 77 posts · 18 votes
6y
Originally posted by @Doug McVinua:
@Robin Morales Being based in Phoenix I clearly have a bias, just want to get that out up front!

Why Phoenix:

Jobs and the economy, we are growing at a rapid rate with great diversity in employment sectors. We have large techs like Intel spending billions on fabrication plants, large insurers like State Farm expanding the workforce, and many others that have either recently moved or announced plans to locate significant employment in the Phoenix area.

Arizona Landlord-tenant laws tend to be very fair and by most standards lean towards protecting the landlord. For example, evictions can be generally be accomplished in under 30 days at a cost under $500.00.

We have lots of land to develop and grow, keeping the cost of development reasonable.

Our water allocation is solid and deemed to be dependable with multiple sources.

Arizona has a very low risk of natural disasters such as earthquakes etc.

In the portfolio of properties I manage I currently have zero vacancies, April rents were paid in full by the 9th and May rents were paid in full on the 8th. Yes, I had tenants impacted by COVID but between assistance and even new jobs we were able to get them thought it so far.
Rents have been going up annually and were even strong during the downturn of 2006-2009.
Just a few reasons why I believe in Arizona!!
Doug thank you so much for your insight. I see that you are a property manager, Which Zip codes in AZ would you yourself consider investing in?
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Robin Morales
OP
Member since 2020 · 77 posts · 18 votes
6y
Originally posted by @Bill B.:
I think they’re very compatible.
Also very easy to evict tennants quickly cheaply, no natural disasters, cheap flights, low maintenance newer houses.
No state income tax probably won’t effect you much if your only in AZ state income is rental properties and you deduct the depreciation you’ll probably have a loss.
I go the other way on Doug’s plenty of room to keep building and keep things affordable. We’ve got limited space to help force appreciation as people in Vegas think a 20 mile trip across town is insane. And certainly don’t want to live in the boonies.
I I have 14 rentals, In April 13 paid and one lost their business due to shut down. Finding a replacement tennant took two weeks (the longest in my 20 years) but I got $1900/mo rent up from $1600. in May all paid in full. All of this is SFR. I don't know the Phoenix Small MFR market but it's probably better than Vegas.

I don’t think you can go wrong with either one, and because you’re in Cali, they’re you’re best options. IMHO.

Bill! I appreciate your insight. I'm actually heading to Vegas in two weeks. what zip codes would you consider looking at ??

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Account Closed
Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes
6y
Originally posted by @Doug McVinua:
@Robin Morales Being based in Phoenix I clearly have a bias, just want to get that out up front!

Why Phoenix:

Jobs and the economy, we are growing at a rapid rate with great diversity in employment sectors. We have large techs like Intel spending billions on fabrication plants, large insurers like State Farm expanding the workforce, and many others that have either recently moved or announced plans to locate significant employment in the Phoenix area.

Arizona Landlord-tenant laws tend to be very fair and by most standards lean towards protecting the landlord. For example, evictions can be generally be accomplished in under 30 days at a cost under $500.00.

We have lots of land to develop and grow, keeping the cost of development reasonable.

Our water allocation is solid and deemed to be dependable with multiple sources.

Arizona has a very low risk of natural disasters such as earthquakes etc.

In the portfolio of properties I manage I currently have zero vacancies, April rents were paid in full by the 9th and May rents were paid in full on the 8th. Yes, I had tenants impacted by COVID but between assistance and even new jobs we were able to get them thought it so far.
Rents have been going up annually and were even strong during the downturn of 2006-2009.
Just a few reasons why I believe in Arizona!!
@Robin Morales if I tell you why I'm buying Turnkeys in AZ instead of NV I'd have more competition wouldn't I? ;-)
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
@Robin Morales

North of 95 where it goes E/W

West of MLK

Usually south of 215 although there’s some areas north of 215 if you stay between Aliante and 95

East of 215 for sure

If Blaze pizza or some such place is open by the time you get here and you want to talk real estate I’ll talk your ears off and show you my properties and numbers.
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Robin Morales
OP
Member since 2020 · 77 posts · 18 votes
6y
Originally posted by @Bill B.:
@Robin Morales
North of 95 where it goes E/W
East of MLK
Usually south of 215 although there’s some areas north of 215 if you stay between Aliante and 95
West of 215 for sure
If Blaze pizza or some such place is open by the time you get here and you want to talk real estate I’ll talk your ears off and show you my properties and numbers.

I appreciate you Bill thanks!
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Pamela Sandberg
Realtor / Attorney · Phoenix, AZ · Member since 2018 · 388 posts · 265 votes
6y
Obviously I am biased here, but I have to vote for Phoenix. Job growth in the coming years is expected to be big. COVID might put a damper on some of that, but not all of it, and this is evidence that we will have stable, reliable growth in the housing sector in the housing market over the next few years. I just don't know that Vegas can offer that stability right now.
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Eric FernwoodBusiness Member
Realtor · Las Vegas, NV · Member since 2014 · 997 posts · 1k+ votes
6y
Hello @Robin Morales,

I can not answer the question of whether Phoenix or Las Vegas is a better investment location, but I can tell you how I would make the determination. Before you start, you need to know your goal, your success criteria. If you are basing your decision on which location has the least expensive properties, you would need a very different set of questions from which location produces better return rates. I will choose the following three criteria upon which to base my comments.
1. Sustained profitability - The property must generate a positive cash flow today and into the foreseeable future.
2. Appreciation - Currently and likely to continue appreciating for the foreseeable future at or above the rate of inflation. Rents track property prices so if prices are rising, rents will follow since both reflect demand.
3. Non-Coercive Government - Only invest in a location where you can make money and you control your property as opposed to the local government dictating what you can do.
The above criteria does not incorporate one additional critical factor, your investment team. Your success is totally dependent on having the right team of people working for you. Unless you can put together a strong team in the location you are considering, look somewhere else. I included the table below to give you an idea of what you should typically expect from team members. Of the lot, the property manager is the most critical.

Some of the requirements to achieve each of the above criteria:
Sustained profitability
- The property must be continuously rented by tenants who stay a long time, pay the full rent on schedule and take care of the property.
- Maintenance costs are low (newer and resilient construction)
- Real estate and personal income taxes must be low.
- Insurance cost - This is an excellent indicator of the likelihood that your property will have expensive damage.
Appreciation
- Demand must be increasing. Your target tenant pool population must be increasing. New jobs are being created at or above the rate of population increase, and the jobs pay a similar income to the current jobs your tenant pool has today.
- Urban sprawl - Not talked about much but you have only to look at any major city and you will see locations that where once the best in town and are now distressed. This is usually the result of urban sprawl. You need to be very aware of which way the city is expanding and buy in the direction where the population is moving. Urban sprawl also depresses property prices and rents over time because people can always move further out and buy or rent less expensive (and newer) properties.
Non-Coercive Government
- Evictions - You must have the ability to cost effectively and quickly remove non-performing tenants. If tenants know that they can be readily evicted they are more likely to pay the rent than in locations where it can take months or years to evict.
- Regulations - Does the local government impose expensive regulations (like occupancy certificates before renting the property) or rent control?

Below I did a basic comparison between Phoenix and Las Vegas.

Some observations:

Both cities appear to be healthy and growing.
Phoenix property prices are likely be lower and appreciate more slowly than Las Vegas due to unlimited urban sprawl. By comparison, Las Vegas is surrounded by federal land and has no room for expansion so appreciation is likely to be greater in Las Vegas. Today. Las Vegas has very limited developable land left so urban sprawl almost does not exist. Here is a time lapse video for Phoenix. And a time lapse video for Las Vegas.
Since Arizona has a personal income tax, you will need to have a higher return in Phoenix than Las Vegas to compensate.
Property taxes in Las Vegas and Phoenix are approximately the same.
Home ownership rates are lower in Las Vegas, which indicates a larger population of renters. This is a big advantage for investors.

While objective (numeric) information is available online, subjective data is not. The best source for subjective information are local property managers. Property managers deal with properties and tenants every day. They know what things cost, what rents and what to avoid. I recommend getting in contact with a few property managers in both locations. Come up with a set of relevant questions and ask the same questions of all property managers. Write the answers down so you can compare later. Also, keep in mind that you are interviewing for your property manager. If you would like some ideas on interviewing a property manager, email me for our white paper titled, “A Process for Selecting the Right Property Manager”. Some of the questions I would ask multiple property managers include:

What property type, configuration, location and rent range would you recommend if I am looking for a reasonable return and low tenant turnover?
Typical annual maintenance?
Cost and time to evict?
Average tenant stay?
Average time to rent?

Robin, I did not offer an easy answer but I hope I provided a framework for comparing the two locations. Keep in mind that you are totally dependent on having the right team of people working for you in order to succeed in investing. Unless you can put together a strong team in the location you are considering, look somewhere else.

[email protected]702-358-8884

FERNWOOD Team, KW VIP Realty520 Reviews

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Andre TaylorPro Member

Rental Property Investor · Chicago, IL · Member since 2017 · 221 posts · 181 votes

I used to lived in Vegas from 2016-2019 and will be moving back in a few months. I will say either market will work for you. More people continue to move out of Cali to Phoenix and Vegas so the rental market has been on fire; especially when I was living there.

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Doug McVinuaPro Member

Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes

https://techcrunch.com/2020/05/14/tsmc-to-build-a-12-billion-advanced-semiconductor-plant-in-arizona-with-u-s-government-support/

[email protected]602-751-7577

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Robin Morales

Member since 2020 · 77 posts · 18 votes

@Eric Fernwood Eric wow! Thank you so much for putting this together for me! You gave me so much insight and things to look at. I appreciate you !

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Robin Morales

Member since 2020 · 77 posts · 18 votes

@Pamela Sandberg where in Phoenix would you advise ?

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Pamela Sandberg

Realtor / Attorney · Phoenix, AZ · Member since 2018 · 388 posts · 265 votes

Depends on your investing goals. The "hot" areas are Tempe/Chandler/Gilbert. High entry point, but very low vacancy and rents are rising quickly. You can buy cheaper in other parts of town, but you might face higher repairs, less reliable tenants, etc.

We've been appreciating SO quickly that it can be difficult to cash flow anywhere in town. Some investors have looked to outlying areas (Casa Grande, Apache Junction, AZ City) with much lower entry points. Lower rental income and a bit more vacancy, but much easier to cash flow.

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