Arizona oversaturated with STRs? Are LTRs the play right now in AZ?

Question

From what i'm seeing in the Phoenix, AZ metro market is that it is vastly oversaturated with STRs. Ive heard it has been very hard for STR owners to get dates booked, especially in Scottsdale. Any current STR investors have any insight on this trend? Is moving into LTRs the smart play since the IRs are forcing more people to rent rather than buy?

Ryan Hoover · Answer

Getting traction with a brand new STR in certain Scottsdale areas is difficult due to all the new listings over the past 2 years.  With that being said overall demand is still high, though new inventory seems to be outpacing demand.  Price per night will continue to go up as travel demand is expected to stay high, thus overall returns can still be good even with the higher vacancy.

I do think certain areas are better opportunities than others right now.  Scottsdale, especially near Old-Town, has been all STR lately, making that challenging to stick out over the competition.  There are other neighboring markets that are very much in demand as well, with less competition.

The greater Phoenix area is still a great choice for long term rentals.  Rent growth and overall demand will keep putting upward pressure on rental prices.  Yes, finding a cash flow property day one is a challenge, but the long term rent growths and ability to refi when rates come back down will make it an attractive investment.

Connor Williams · Answer

I am wondering about this as well. I have heard mixed reports. One investor I spoke with actually said the opposite. They are booked through 2023.

The numbers I am running don’t seem to pencil South of Phoenix for a STR

Jared Hottle · Answer

The short-term rental market in Arizona, particularly in popular tourist destinations like Phoenix and Scottsdale, has been growing rapidly in recent years. However, it is difficult to say whether the market is oversaturated. Factors such as the overall health of the economy and tourism industry, as well as local regulations and zoning laws, can all impact the supply and demand for short-term rentals.

As for long-term rentals, it depends on location, It is likely to be less affected by the ups and downs of the tourism market, and can provide a more stable income stream for investors. With that being said, it's always important to do your own research on the rental market in a specific area, such as looking at vacancy rates, rental prices, and population growth.

It is important to consider your own investment goals and risk tolerance when deciding whether to invest in short-term or long-term rentals. A professional property manager or a real estate agent who specializes in the area you are interested in can also be a valuable resource for understanding the local market.

Aaron Walker · Answer

I have one of each in the Phoenix area. My STR is still consistently booked and generating a much better return than the LTR. That being said I think a STR needs to have some amenities that stand out compared to other comparable properties (ex. heated pool, hot tub, on a golf course, walking distance to shops/entertainment)  We have an electric heat pump on our pool and don't charge extra for heating during the winter which I think helps with our bookings. Heating with gas is much more expensive in which case I would recommend charging to heat the pool during visits.

Noah Laker · Answer

I host almost 100 properties in Arizona. It has never been this bad. Occupancy dropped like a rock after Q1.

We are managing to stay afloat through midterm rentals, direct bookings, student housing etc but Arizona attracted too much dumb money through a combination of good times and no barriers to entry.

My STRs in Northern California are performing MUCH better. So this "Airbnb Bust" is highly regional. I am still bullish and not going anywhere but this will weed out the weaker players. There's no more easy money in Arizona.

Chris Risi · Answer

hey guys. I still don't think LTRs really work too well right now in Phoenix, given still high prices...i have several STRs right now. But been trying to go more Mid term, like 30 day+ rentals. Currently has been working, but it is also prime season, so i'll see how its going as we go into Summer...

Susan Thelen · Answer

4 bedrooms are more lucrative than 1-3. The market is over saturated with 1-3 bedrooms. There needs to be something unique about your home (think Instagramable, bocce ball, putting green, themed, etc.) Also high end, larger homes are more lucrative than your basic home. If a home has multiple structures (think 2 separate living quarters) this can be great as well. For example if  grandparents are traveling with their kids and grandkids and they need some downtime, if you have a whole separate structure on the property, they can go recuperate for a few hours by themselves and then join the rest of the family later on. I have a client that purchased a multiple structure home in Tempe last year and his revenue for Jan-March was $45K.

Connor Williams · Answer

The snowbird market is still strong. We get calls all the time for 5 month rentals. Pros-very lightly lived in, usually 1-2 people, they pay utilities, guaranteed 5 month cash. Cons- you are losing potential cash vs VRBO or AirBB during the prime seasons,  you still need to rent the property out for the 7 other months.

Prices continue to drop from what I am seeing in the greater Phoenix area. Might pull the trigger in the next week or 2. 10% under asking, maybe an owner finance, can’t score without shooting!

Arizona oversaturated with STRs? Are LTRs the play right now in AZ?

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