I am thinking of purchasing a vacation rental in the Scottsdale, AZ area. I would love to learn pros/cons regarding the vacation rental space in that specific market. Anywhere else in AZ that I should consider? Thanks!
It's definitely a great market but also very competitive/expensive as others have noted. I receive a few messages a week from BP users looking for a $400K turnkey 3/2+ vacation rental with a pool, and that deal simply does not exist in Scottsdale. I've been able to find some nice homes $400-500K in Chandler/Tempe that could make good vacation rentals, but the yearly revenue is going to be lower than Scottsdale. If you're looking for a project, single-family homes in Scottsdale can be found in the mid-400s from time to time, but "turnkey" homes are going for 600-700k+ and then you'd need to budget to furnish. Personally, I'm a fan of condos (fewer HOA-friendly options but they are there for $200-250K) as they are more affordable and give more flexibility in case of regulation changes -- renting out a 1-2 bedroom condo for 30/60/90+ days seasonally will likely be easier and generate a better cash-on-cash return than a 4 bedroom home.
The market is extremely competitive right now to purchase under $750-800K. Lots of bidding wars with cash offers. It is a great market for STR as you can charge a high dollar amount per night.
@Katharine Wright Scottsdale is a great, highly-desired area in Arizona. If you find a deal where the numbers work, I'd highly recommend it. I spent this last weekend at a cabin in the Torreon community of Show Low, and it was awesome. It has me doing some deep research into prices and availability, The mountains are great in AZ, as it offers fun in the snow in the winter, and an escape from the heat in the summer.
It's definitely a great market but also very competitive/expensive as others have noted. I receive a few messages a week from BP users looking for a $400K turnkey 3/2+ vacation rental with a pool, and that deal simply does not exist in Scottsdale. I've been able to find some nice homes $400-500K in Chandler/Tempe that could make good vacation rentals, but the yearly revenue is going to be lower than Scottsdale. If you're looking for a project, single-family homes in Scottsdale can be found in the mid-400s from time to time, but "turnkey" homes are going for 600-700k+ and then you'd need to budget to furnish. Personally, I'm a fan of condos (fewer HOA-friendly options but they are there for $200-250K) as they are more affordable and give more flexibility in case of regulation changes -- renting out a 1-2 bedroom condo for 30/60/90+ days seasonally will likely be easier and generate a better cash-on-cash return than a 4 bedroom home.
@Justin Phillips said it right; I would recommend sticking to the outlying areas as they are a more target rich environment.
Why I say that is, remember the Gold Rush of 1848 in California and 1858 in Colorado? Well everybody and their cousin has been trying to cash in on the STR gold rush in Old town scottsdale for the last 3-4 years, so you are trying to strike gold in areas that have already been very over worked. There are few properties that are HOA friendly, much less STR friendly to investors. PV has for the past 2 years been pleading with their local mayor and anyone else that will listen that they're tired and done with what the short-term rental industry has done to their neighborhoods. Then investors went hunting in areas that attracted big crowds or events, and then the same thing happened to the small towns like Jerome, Cottonwood, Flagstaff (well it's not a small town, but you get what I mean :) and Pinetop. In Jerome they got so upset with one local resident that they tried to bring criminal charges against him for doing STR and "ruining" their community.
That being said, there are plenty of outlying areas that are target rich for STR and vacation rentals. Anywhere that business travelers, local attractions, travelers for medical reasons or for higher learning will want to stay anytime of the year are great locations. Learn from those that tried to hit the "event" driven or touristy areas, and then had to face next to no bookings during a downturn in travel (i.e. pandemic.) Some of those investors were friends of mine, and they had to suck up thousands of dollars of lost revenue every month, and most became motivated sellers.
Stick with the areas that have year round traffic; locations near business travelers, attractions, hospitals, universities and airports.