Phoenix has been on the radar for investors all over the world for several years. The real estate market is ideal for a diverse population of investors for many reasons. There’s sunny weather. A strong job market. A growing economy. Affordable home prices relative to other major cities across the U.S.
The tenant pool is growing along with the population, and it’s an excellent time to own rental homes in Phoenix. This entire area has become a hotspot for real estate investors seeking a new market to invest for the first time or to expand a growing portfolio.
But, a successful investor knows that profitability depends on buying the right property in the right neighborhood. With so many neighborhoods to choose from, how can investors pinpoint areas with the most potential for growth?
Our experience as property management experts in Phoenix has given us some insight that is sure to help. Let’s explore the strategies and signals that smart investors can use to identify emerging neighborhoods perfect for rental properties in the Phoenix real estate market.
How to Understand the Phoenix Real Estate Market and Its Emerging Neighborhoods
Before diving into specific neighborhoods, it’s essential for both local and out-of-state investors to grasp the broader Phoenix real estate landscape and why it’s attracting so much attention. The city continues to attract new residents due to its relatively affordable cost of living compared to other major U.S. cities. Remote workers are finding it an ideal place to set up for a few years. Residents escaping more expensive markets in California and across the west coast are finding they can enjoy warm weather and abundance of entertainment, recreation, and culture in Phoenix. This influx fuels demand for housing, making it an attractive market for rental property investors.
What makes an emerging neighborhood a particularly good idea for investors? And how can you spot an emerging neighborhood when you find a property there? Identifying an emerging neighborhood involves analyzing various factors that signal growth and increased rental demand. Here are some key characteristics to look for:
Development and Infrastructure Investment
Neighborhoods with significant ongoing or planned infrastructural developments often experience increased property values. We are always looking for areas with new roads, public transportation expansions, or commercial projects. These developments make neighborhoods more accessible and appealing, attracting both tenants and potential homebuyers.
Population Growth
Look for neighborhoods that are gaining residents instead of losing them. Rapid population growth is a strong indicator of an emerging neighborhood. Areas experiencing an influx of new residents suggest a strong demand for housing. This demand can lead to higher rental rates and property appreciation over time. Keep an eye on demographic trends and migration patterns in your target neighborhoods.
Economic Indicators
A thriving local economy can drive neighborhood growth and create excellent opportunities for both owners and renters. Research areas with decreasing unemployment rates, new business openings, or tech hubs. Economic strength attracts professionals who seek quality rental accommodations, boosting the rental property market. When you own an investment property that’s in a neighborhood where people are clamoring to be, you know it’s going to be profitable.
Revitalization Projects
Consider neighborhoods undergoing revitalization efforts. These areas may have historically underperforming markets but are now seeing investments in renovation and beautification projects. Revitalized neighborhoods often become trendy locales with increased demand for housing and amenities, offering higher returns for investors. This underscores the importance of working with Phoenix property management and real estate professionals who know the local market well.
School Quality and Safety
Quality schools and low crime rates are top priorities for tenants with families and even for tenants without children who understand that a good school district creates a desirable neighborhood. Any properties near reputable schools and with a strong sense of community typically maintain high occupancy rates and can command premium rental prices. Tenants like to live in a neighborhood with parks and conveniences, too.
Promising Phoenix Neighborhoods for Real Estate Investment
Now that we have covered some of the key characteristics of emerging neighborhoods, let's look at some promising areas in Phoenix that currently show potential for real estate investors.
Roosevelt Row
We talked about revitalization projects earlier and we can tell you about one such area that has been an ongoing revitalization project for years. It’s a completely new landscape now, but the neighborhood has kept a lot of its original charm. We’re talking about Roosevelt Row, a vibrant arts district, which has transformed significantly in recent years. With its eclectic mix of galleries, eateries, and cultural events, the area attracts remote workers, professionals, creative types, and even retirees looking for a walkable neighborhood with low-maintenance living. Ongoing development projects continue to fuel interest in this unique part of Phoenix.
Arcadia
Known for its charming ranch-style homes and scenic views of Camelback Mountain, Arcadia remains a sought-after neighborhood for both renters and buyers. The area’s proximity to downtown and Scottsdale makes it an attractive choice for those seeking convenient access to dining, shopping, and entertainment. Some of the best public schools in Phoenix can be found in this neighborhood. There are some great opportunities for walking and biking along the Arizona Canal. There’s a real sense of community throughout Arcadia, and many of the homes here are spacious, with open and modern floor plans.
Gilbert
Located southeast of Phoenix, Gilbert boasts a family-friendly atmosphere with excellent schools and parks. The town's rapid growth, coupled with its thriving local economy, makes it an ideal area for rental property investments. There are some great shopping opportunities and malls in Gilbert, and the historic Hale Theatre Arizona is here. Property values in Gilbert are rising, which makes it an ideal neighborhood for investors who are looking to capitalize on lower-than-average sales prices while still ensuring that their long-term ROI is healthy. Gilbert provides an opportunity for excellent cash flow and enviable appreciation. It’s becoming more competitive as more real estate investors notice its potential, so get in on this area sooner rather than later.
Central Phoenix
Central Phoenix offers a diverse mix of historic and modern homes, appealing to various tenant demographics. The area's walkability, access to public transportation, and numerous dining and cultural attractions make it a prime spot for renters. Whether we’re talking about downtown Phoenix or midtown Phoenix, staying in the city is becoming a more desirable option for a lot of tenants today. There’s access to professional sports, major entertainment hubs, and major schools such as The University of Arizona College of Medicine and Arizona State University. Buying an investment property in Central Phoenix will ensure a steady pool of well-qualified tenants. Investors interested in single-family homes will find plenty of inventory, and there are also units in a number of small apartment buildings for sale.
Chandler
A lot of tech companies are setting up shop in Chandler, and it’s also close enough to downtown Phoenix to make living here a good blend of urban and suburban experiences. That’s making the area attractive to tenants. Investors can expect higher rental values thanks to the Chandler standard of living, which includes top schools, very low crime rate, and thriving entertainment options. There’s diversity in the real estate market here, too. Investors can choose a new construction rental home in an HOA neighborhood or a duplex in a more established neighborhood.
Invest in an Emerging Phoenix Neighborhood
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The appeal of emerging neighborhoods is easy to understand, whether you’re a new investor or an experienced property owner.
One of the primary attractions of emerging neighborhoods is their affordability. Properties in these areas are typically priced lower than those in well-established locations. This lower entry price allows investors to purchase properties without stretching their finances thin or going into excessive debt. These options make a lot of sense for first-time investors or those who are unsure about how much capital they want to put into a new investment property.
Because there’s such potential for growth and a lower cost of entry, the appreciation is also a huge benefit to these areas. Emerging neighborhoods often experience significant growth and development over time. As new businesses, infrastructure, and amenities enter the area, property values tend to rise. Investors who get in early can see substantial appreciation in their property's value as the neighborhood develops.
Another great reason to invest in an emerging neighborhood is the opportunity to diversify a portfolio of real estate assets. By spreading investments across different areas, you can mitigate risks associated with any single market downturn. This diversification strategy helps stabilize your investment returns over time.
Investing in Phoenix real estate, particularly in emerging neighborhoods, can be a profitable way for investors to begin or build a portfolio. As long as you’re willing to analyze the characteristics of promising areas and stay informed about local developments, you can capitalize on the growth potential of these neighborhoods.
Let’s talk about the neighborhoods we’ve highlighted here and others we’d like to tell you about in and around Phoenix. Please contact us at Service Star Realty.
