Arizona Investment: Is 1% impossible in the Phoenix area??

9 Replies

We are looking at the Phoenix, Tempe, Scottsdale area for our next investment. This will be our primary home due to work reasons and we are looking to maintain a passive income strategy.

With such an established city, are 1% deals impossible to find? I have also heard of homes coming with “casitas”. Please share your take on 1% or casita strategies. I’ve noticed an extreme price difference with the casitas. Is the investment worth it?

If you have any investor friendly realtors in the area, please do share! Any information is much appreciated.

Hi Brianna, 

1% deals are definitely hard to find (at least on the MLS) right now in the Tempe or Phx area, but I believe they ARE doable, and the key in my opinion is exactly what you made mention of: casitas.

I sent you a message with more detail. Talk to you soon! 

Phoenix typically runs a little below the 1% rule (more like .6 or .7%). However: we do have really consistent, reliable appreciation, so that almost always offsets the reduced cash flow. It's important to remember that 1% is a very rough rule of thumb that applies very differently in different parts of the country. 

Yes, casitas are a great way to house hack, and I know plenty of people who are making a killing by AirBnBing their ADUs. It gives you a lot of investment options (STR, LTR, added value on sale, etc.) I'm happy to answer any specific questions or help you find properties in Tempe with ADUs!

Let me preface this by saying that I am not familiar with the Phoenix Market.

You are more likely to find a property that meets that criteria when working with distressed sellers.  Look up what properties are about to go up for tax auction in your county/city.  You may be able to purchase something waaaay below market value because these people are in distress and about to lose their house. 

0.7% is more likely

Sourcing distressed deals either by yourself or through a wholesaler is another good way

Auctions are pretty packed, get bid up pretty far and a lot of times you aren't able to view the property beforehand

@Brianna Andreola

Throw the 1% figure out the window. All real estate metrics are relative. As the other members have mentioned, the average around the Phoenix area is much lower. A "deal" could be considered anything that performs better than average, so 0.85% could be the metric moreso to shoot for.

But then again, this is going to be your primary residence, so you and your husband so discuss what's more important to you, the ROI or the quality of life/neighborhood/property. They're kind of at ends with each other, so make sure you're both on the same page and looking for the same thing.

You could go the duplex route for a little more ROI, but a casita probably gets you the best of both worlds with the home you want in the neighborhood you want with a little added income from renting the casita.

And yes, it is more expensive. I would contrast the added cost for a casita vs. a home in the same neighborhood that doesn't have one and what difference the income will make to you for the time you plan to live there. Only way to know if it's "worth it."

Go to Amazon and look up a book called House Hacking, by Ben Leybovich. I wrote this book a couple of years back when having moved to Phoenix I bought a casita house hack. 

I invest in apartment communities and wouldn't recommend SFR for investment purposes in this cycle in Phoenix. I am happy to report, however, that I am still very much enjoying the same house hack today :)

The income is stable and much less headache than an SFR. Feel free to reach out, and good luck!

@Brianna Andreola not sure if you’re going for immediate investment potential via house hacking or looking for income later, but we just moved out of a 1% deal— we purchased almost 2 years ago, lived in and fixed up, and rented a few weeks ago at 1% of purchase price. Happy to brainstorm if you’d like to discuss!