Updated: July 18, 2022
- Investing in rental property is an excellent way to save for retirement or establish another source of income.
- Phoenix and Denver are two promising areas for those looking to purchase rental investments.
Real estate investing can be an excellent financial opportunity, but the location is everything, a saying that is true with most things in real property. When you’re searching for a property to buy, look for a market that has a steady supply of people looking to rent so that demand is always high so that you’ll be able to charge more for rent. Some ideal real estate markets cater to young professionals, college students, and people who travel a lot for work. Population growth is also a positive indicator when seeking a market for an investment property. Phoenix, Arizona, and Denver, Colorado, and the surrounding neighborhoods are two excellent rental property markets.
Phoenix, Arizona
In a report published on CNN Money News, Phoenix was ranked number 8 on a list of 10 best cities to purchase rental investments homes. According to the report, in 2004, Phoenix was the poster child for the housing bubble, with pricing increasing annually in the double-digits during the boom.
However, home prices fell 47% between the market’s height in 2007 and 2014, and foreclosures rose dramatically. Many people lost their homes to foreclosure and were forced to rent, which means rental prices are highly competitive. Experts expect investors to earn 2.3% more on their returns than the national average.
Market monitors in Phoenix think rent prices will increase significantly in the years to come. The positive side for investors is that Phoenix’s job market is growing, as many corporations are looking to move their headquarters to the valley. In addition, the population is steadily growing, increasing nearly 8% between 2008 and 2014.
According to Realtor.com, as of February 2021, the median listing home price in the Phoenix real estate markets is $349,000, and the median sold home price is $330,000. The American Community Survey from the United States Census Bureau found a median rent (monthly gross residential) for the Phoenix-Mesa-Glendale metro area was $1,188 in 2019. The same figure for Phoenix proper was $1,202 in 2019. The upward trajectory is a positive sign for the real estate market. While the pandemic has caused some disruptions, experts believe they are temporary, and the market will rebound quickly.
Population growth is another indicator that Phoenix is an attractive market for real estate investment. Between 2010 and 2020, the population data shows growth by 19.92%, the highest rate in the state and fifth in the United States. For those looking to invest in real estate, this means a steady stream of people who may need long or short-term residential rental properties.
Also, Phoenix has excellent job growth prospects. Phoenix’s unemployment rate as of December 2019 was 3.6%, before the pandemic, another good sign for rental property owners. When work is plentiful, renters are less likely to default on rent payments. Job market growth is expected to continue as the economy recovers from the pandemic, which is another reason for rental property owners to be optimistic.
Phoenix is one of the best cities in which to invest. However, in addition to Phoenix itself, many of the surrounding neighborhoods are highly desirable for investment properties. A few to check out are Ahwatukee Foothills, Desert View, and Paradise Valley. These neighborhoods appeal to young families with robust school systems, low crime rates, and diverse populations. However, they also appeal to young professionals and retirees for the same reasons.
Denver, Colorado
Another appealing market for investment property is the Denver, Colorado, area. Here are a few of the reasons that make it such a prime candidate for investment buyers.
- As of 2019, the median property price was $447,439, according to Mashvisor data. While this is higher than the national median, it’s significantly lower than the median for the state of Colorado ($542,275).
- For single-family homes, the Denver rental market has a price-to-rent ratio of 19, compared to 23 for the state of Colorado.
- Over the last ten years, home values in the Denver real estate market have appreciated more than 92% in the ten years before 2019. While appreciation has started to slow down, leading to a buyer’s market, the area’s home values remain steady.
- Approximately 50% of Denver residents live in a rental property, which should encourage real estate investors that demand could stay high.
- Denver has a population growth rate higher than the national rate, one of the few large cities to boast such a figure.
- The unemployment rate in Denver is traditionally low, just 3% before the pandemic. Job growth is one of the factors driving population expansion.
Some of the neighborhoods around Denver to consider for purchasing single-family investment property are Capitol Hill, Uptown, Highlands, and Sloans Lake. Each has a personality all its own, from the busy crowds around Capitol Hill or the more open spaces of Sloans Lake.
Where Can I Learn More?
If you’re ready to make your investment real estate purchase in the Phoenix or Denver area, contact Capital Fund 1. Our experts can help with a simple three-step loan process. With over 100 years of real estate investment and lending experience, Capital Fund 1 can make the process easier and faster than you ever imagined. We can help with investment property loans through our network of private money lenders and other resources. Whether you’re looking to invest in real estate for income in retirement, for tax benefits, or other purposes, Capital Fund 1 is the only name you need.