The answer depends on what type of property it is. A single family home or multifamily. Either way rates are up the most over last year in central Phoenix. Also what type of vacancy? There is physical vacancy and economic vacancy. Many investors don't seem to take economic vacancy into account. This would be concessions, lower rents, etc. In single family homes tenants are just like home owners, so good schools, clean neighborhoods, access to shopping, dining etc. In multifamily it's a bit different.

There are several good areas. One of the best is the Ahwatukee area of Phoenix. My wife and I are re-habbing a home in the 85044 zip code of Ahwatukee and as I have kept tack of the rental comps and availabilities in the immediate area, it is apparent that 4 bedroom homes with at least 2,000 square feet and 3 car garages are rare to non-existant. We will be putting this home up for rent in July and it should rent in a weekend.

This is a tremendous area to buy a home and rent it out.

Hi Peter,

Staying close to downtown Phoenix or Scottsdale would be your best bet. You may be able to retain tenants in some of the outerlying areas but your rental rate will be a bit lower due to the commute time. Make sure you run the numbers conservatively so that you maintain a positive cash flow. As many investors have learned the hard way over the past few years appreciation is not always guaranteed. And carrying that negative cash flow on a depreciating asset can be very disheartening.

Check out http://www.homeaway.com for vacation rental areas. You will make much more than long term rentals if you can furnish the property and advertise it. Check out my listing for a good example at http://www.homeaway.com/vacation-rental/p174285 . it is only $300 a year to advertise your property.

Hey Peter,

I would suggest anywhere is fine, so long as there's commercial development (jobs) to support a good rental market (Central Mesa, Tempe, Chandler, and South Scottsdale are all good ones...I would stay away from the outskirt cities like Queen Creek.) My company manages over 100 properties, mainly in the east valley, and this is what we're seeing. Best of luck to you.

I'm with Steve as far as location. I'm a big fan of South Scottsdale in particular. You draw a wide variety of tenants: from students at Scottsdale Community College & ASU, young professionals that like to be near the night life in Old Town, families and older tenants that like the central location (and Scottsdale schools), commuters who need easy access to the 101 freewayor Sky Harbor Airport ... the full spectrum. After peaking in value during '05-'06, values have fallen a bit in the area to make prices more palatable for investors. You can find a decent 1400 sq ft, 3 bed, 1.75 bath single-family home in the upper 200s. Rents have risen at the same time as more people started opting to rent instead of purchase due to affordability issues.

Another positive to the area is the future appreciation expectations. It is the oldest and most affordable part of Scottsdale, and centrally located. As long as Scottsdale is one of the more sought after destinations in AZ, there will always be demand for entry level housing. Plus, more and more of these properties are being rennovated and finished with high end features. I only expect this to continue as the entire area is being revitalized. The negative to the area would be the age of the homes. Many of the properties are 50 years old, so home inspections are critical in determining whether a property has been properly maintained over the years, and how much increased maintenance you can expect. Of course, the age of the homes also account for much of the charm. There is no shortage of tenants (and future buyers) for the cute red brick homes that have received good care.

Please feel free to browse my site or contact me if I can be of any assistance. Best of luck!

I'd say that I agree with Steve and Richard, look for a great location. North Phoenix happens to be a favorite of mine as rental areas go. Look for a neighborhood with great freeway access, close to schools (keep trade schools in mind too), and in close proximity to major employers. N Phx usually offers these and tends to have newer homes-less operating expense. Desert Ridge is great but if you look just west you can find affordable homes that offer all of the key items that I mentioned.

Good luck!!!

Peter, I have 5 rentals around the valley. All are single family homes. I have not had trouble renting any of them over the last four years. Right now, all 5 are rented, thank God, with great tenants. The two secrets we have found to keeping the vacancy rates low are location and presentation. How much you are willing to spend will in some ways determine the location. Two areas I have found to be good are Desert Ridge in North Phoenix and the Chandler area close to Queen Creek Rd and Alma School. When it comes time to rent any of our home they are cleaned until they are spotless so they are presented well to the possible tenant. Also, all mechanical items are in good working order so the tenant does not have to worry about those things when they move in.

Should you like to find out more about our professional real estate team you can view our website at http://www.bergdobblesteam.com. From there you can also use our search engine linked to the mls to find properties around the valley. Should you need any help with finding good rentals don't hesitate to call me. Good luck with your search.

I personally own 10 investment rentals, and then I manage a good number more. The only places that are "bad" are in the most outlying areas. Goodyear, Maricopa, Queen Creek, Florence, Surprise, etc. Stay away from those areas and you'll be fine.

I'm not a fan of Tempe myself. I like a tenant that will stay longer than 9 months. However, Tempe offers some pretty nice appreciation, and a good rent. Instead of Tempe, I'd strongly consider south Scottsdale. If you want a student as a tenant, you can get one, but you can also get young families that want the Scottsdale address.

As a general rule, I like properties within a few miles (2 or less) of a current freeway. If it's close to a freeway, it's close to anything.

For quality of tenant, my north Phoenix and South Scottsdale properties have done the best. If you have the money, however, a high end, North Scottsdale property is actually unbeatable. Positive cashflow is there from day one, and that type of tenant is generally easiest on your maintenance costs.

Hey Pete,
Jay is right ASU is a safe bet. Tempe is 40% rentals, and landlocked according to ASU`s J. Butler.

Another area for you to consider, even though it will be more costly is Downtown between (S)Lincoln St,
(N)Van buren ST,and (E)7th ST and (W)4th ave.
You have Chase field, U.S. Airways, Phoenix Symphony hall, civic center, Dodge theater. Great restaurants and night life.
Its a strong area for rentals. The light rail will run right through the area.
Good Luck

Peter - there are a LOT of vacant houses in the Phoenix market right now. Not all of the owners of these are attempting to lease these properties, but many are.

Anywhere close to ASU in Tempe will generally have very low vacancy rates -- at least when school is in session. Additionally "winter visitors" often lease properties, however they tend to be relatively short term rentals and leasing them in the summer months can be problematic.