Thoughts on the Tucson market?

Question

I live in a very HCOL city that is nearly impossible to find rents properties due to extreme over valuation and low rents, so looking out of state. I lived in Tucson for a few years and always felt it was a prime up and coming city that was very affordable and a great place to live. Any thoughts on real estate investing there? I have quite a few friends there and know some realtors but gauging things first.

Emily And Eric Erickson · Answer

@Scott E. super bummed you had a bad experience here in Tucson however sounds like you had an experience that was not that dissimilar to my impressions of Central Phoenix which is a VERY different area versus where you live in Scottsdale (a suburb of Phoenix). The Gem show is hosted in our industrial areas that can handle large crowds and easy access to the highways and definitely lack on the aesthetics

@Adam Berlinberg your initial impressions from when you were here before still hold true today. The main difference between Tucson and Phoenix besides price (Phoenix runs between $100,000 to $200,000 higher for same type of house/neighborhood) is that Phoenix is a true metroplex which it has earned being the 4th largest metro area in the country while Tucson continues to be strong 2nd tier market with just over 1M population.

Our rent rates have kept pace with our house prices and you can still find long term rentals that generate strong positive cash flow. We have also had a big growth in STR interest as we are more of a laid back resort town than the busy go-go-go you find in Phoenix. Case in point is our access to the mountains, number one rated bike trail in the country (breaking news - Google the Huckleberry Loop) and great balance between snowbirds (retirees who come just for the winter) and growing industries like Raytheon, Caterpillar, Roche, University of Arizona and Davis Monthan Airforce.

We will never win the popularity contest with Phoenix (4 to 1 odds make that tough) but I wouldn't trade my mountain views for access to the I-10/17/201/101/60 highway spaghetti bowl for anything. In fact, focus your search on Phoenix, I don't need the competition. :)

Patrick Allen · Answer

To piggyback on @Eric Erickson's comments:

When the mass exodus out of California, Illinois, et al started happening in 2020, Arizona was not the *fastest* growing state in the country, but it was certainly one of the fastest-growing.

Tucson is not the *largest* city in Arizona, but it is the 2nd largest... and it's an attractive place to invest, and to live, for the same reasons.

Tucson absolutely has Phoenix beat when it comes to cycling, hiking and outdoor activities in general. You would be surprised to know how many professional cyclists & triathletes call Tucson their home for half of the year due to great weather, rich cycling history and very high prevalence of dedicated cycling lanes making it one of the safest cities to ride bikes on the road. Not to mention Mt. Lemmon is consistently mentioned as one of the 10 best hill climbs in the USA: people visit from all over the world to ride up Catalina Hwy.

I heard reported in a class on the city's growth recently that Arizona is known to produce 60+% of the country's copper, and the nearby copper mines surrounding metro Tucson offer opportunities for synergy in industries like construction (see Caterpillar, Bobcat, Bombardier Aircraft) and military & defense contracting (Raytheon, the Air Force Base...). Tucson is also the only major city linking shipping ports in Southern California with the entire state of Texas, which is why we've been seeing expansion from companies like Amazon and Homegoods.

As to its investment prospects, I find there to be greater inventory of non-commercial multi-family properties (2-4 units) in above average or even luxury areas downtown, or in well-established neighborhoods adjacent to the University. It is common in many cities for investors to get pinned into having to decide between the income stability of MF and the ability to buy in a great area zoned only for SF, but I would argue that in Tucson you truly can have both. And it can still make sense as a cash-flow play due to Arizona's very friendly treatment of short-term rental properties coupled with a big tourism draw.

Way more dog-friendly too: I walk my dog off leash every single day. Can't do that in a concrete jungle.

Cade Olof · Answer

Hello @Adam Berlinberg I would have to agree with @Scott E. in the fact that you're best off consulting with your friend and Realtor contacts who live in Tucson. I can say living here myself that there are only certain pockets of town that I primarily look at to invest for the reason that Scott pointed out. Tucson is an interesting city in the fact that you could be in a B class neighborhood, go to the next street over and now you're in a C- neighborhood. With all that said, it's important to have boots on the ground and trust your sphere to guide you accordingly. Hope that helps :)

Scott E. · Answer

If you have some friends there and know some realtors there, they will probably be able to offer the best point of view.

My perspective on Tucson is not positive at all. I went out there for the first time a few months ago for the Gem & Mineral show. Looked at some commercial deals while I was there because on paper, just like you, I felt like Tucson would be a great place to invest. Decent prices but very "up and coming" city as you say.

While I was there I was totally disappointed. With the exception of the vibrant strips of bars and restaurants around the college, everything felt very run down and uncomfortable. That includes gas stations, grocery stores, the hardware store, and the residential neighborhoods that we drove through. My truck was even vandalized while parked outside of one of the shows (still dealing with insurance on the repairs to this day!)

I'm sure there are nice pockets of town that we didn't see so I don't want this post to come off as close-minded. But I left Tucson saying that I would never invest my money there.

Thoughts on the Tucson market?

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