Arizona STR? Should I consider it?

Question

I currently own an STR in Gatlinberg,TN and its doing phenomenally! Im looking to now invest somewhere in AZ as the home prices seem reasonable and seems like a very popular destination. Ive looked into Sedona but the house prices seem a little steep. Tucson is nice, but for personal use it would be quite a hike to get to as I live in NYC. Scottsdale and surrounding areas seem like my best bet but i'm uncertain about how strict those areas are on STRs. If anyone has any advice or input about the area and its Pros and Cons regarding STR's that would be amazing. Thanks!

Melanie Johnston · Answer

Hi @Brandon Bonfiglio. Congratulations on your successful STR! As someone who has a STR in Scottsdale I can say that, while there are many operators here, there are just as many guests wanting to book here.

As you already know, Scottsdale is a magnet for people coming to major sports events, including the Phoenix Open and Major League Baseball Spring Training, car lovers coming to Barrett Jackson (and other auctions happening this week) and people coming from Canada and across the U.S. to escape the cold.

While there is likely to be some form of local governmental policy change, that shouldn’t scare you away. Before the advent of Airbnb, Scottsdale was a popular vacation destination for winter visitors who booked a minimum of 30 days. These people were often retired, paid big bucks to stay here and usually weren’t throwing wild parties that could cause damage.

It may be true that you can make more money on multiple short-term stays in a month. But I have chosen to go back to the old model for our high season (Jan-March/April) and currently have guests paying $5800 per month for my 3/2 house with a yard and a pool. (No HOA.)

This has given me back a ton of time, required fewer cleanings and lessened the impact on the neighbors.

I can adapt my calendar to monthly or nightly stays just by adjusting my availability. I attract the longer-term guests through my listing in the MLS, which also appears on Zillow and results in direct calls from potential guests.

There are other locations within Phoenix/Scottsdale that do well, but homes in 85250, 85251 and 85257 are worth a look because they are close to where the action is.

Keep doing your research, checking availability calendars on Airbnb to see how booked Scottsdale properties are or aren’t and run your numbers until you find the right property.

I started my first VRBO in 2005 when you could only lease for 30 days+, so I feel like no matter what the regulatory climate, there are opportunities in a destination where everyone wants to be.

Best of luck,

Melanie

Carlos Carbajal · Answer

I co-own 2 single family homes and 1 patio home in Sedona, AZ with my mom. We purchased these to run them as full-time vacation rentals.

They have done really well. Better than we expected.  However:

• We are noticing the market is getting saturated with vacation rentals
• We have had to lower our rates to keep high occupancy especially in slow seasons like summer
• We added a hot tub to one of our properties to see if it would help bookings - it has but it was a big expense
• Vacation rentals have had negative effects on communities like Sedona by driving up housing costs and making it more difficult to find housing since most people want to turn their properties in vacation rentals
• We are pretty concerned that the law that originally inspired us to do this is going to get repealed or modified (SB 1350)

If I were buying a property now in AZ I would be more careful about pulling the trigger.  My advice would be to make sure you feel like it can still cash-flow even if its not a vacation rental.

Julie Dunlap · Answer

Many hosts out here are people who aren’t running their STRs as a business (watching profits, realizing true carrying costs, etc). The TPT tax is a good current example, many hosts weren’t even aware they were supposed to be paying taxes on their Airbnbs. Pricing is sporadic for most of them, they aren’t picking properties that have solid numbers, and they’re not thinking about possible exit strategies if the market were to change for STRs.

Brandon Bonfiglio · Answer

@Melanie Johnston this was extremely helpful I appreciate your advice!

Julie Dunlap · Answer

Scottsdale is WAY over saturated right now, I personally won’t even bother with that market. My best performing STR is right by the Phoenix airport. There are some pretty serious talks of regulations going on right now and a lot of hosts are very upset about the TPT tax laws in particular. That all being said, my STRs are all cash flowing very nicely even with the additional costs and labor that they require. I’ve purchased one in the last month to convert into an STR and I’ve been actively writing offers for another one. It could be beneficial that some of these regulations coming down the road may weed out the owners who aren’t operating their Airbnbs as a business.

Brandon Bonfiglio · Answer

@Julie Dunlap what do you mean weed out airbnbers who aren’t using it as a bussiness? Can you elaborate that?

Arizona STR? Should I consider it?

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