Are you trying to make sense of Phoenix rental cash flow from a distance? You are not alone. Rents surged in 2020 to 2022, then cooled, and local costs like air conditioning, HOAs, and irrigation can swing your returns. In this guide you will get a simple, Phoenix-specific underwriting flow, practical benchmarks to plug in, and trusted places to verify every line item. Let’s dive in.
Phoenix rent and vacancy snapshot
Recent rental trackers show that Phoenix-area rents peaked during the 2020 to 2022 boom, then flattened in 2023 and 2024. Median rents vary by neighborhood and unit type, often in the mid-$1,000s to low-$2,000s. Use fresh comps for the specific submarket and property type instead of a single metro average.
Vacancy in Phoenix multifamily has generally run in the low to mid single digits. Single-family rentals in good locations often perform similarly or a bit tighter. For underwriting, many local investors use a vacancy allowance between 5% and 8% and adjust higher for seasonal turnover or secondary locations.
Underwriting steps for Phoenix rentals
Use this repeatable flow to move from top-line rent to cash flow before tax.
1. Gross scheduled rent
Start with realistic market rent for the property if fully leased. Pull several comparable rentals in the same neighborhood and bedroom count. Account for amenities like a pool, garage, or updated interiors that can affect rent.
2. Vacancy allowance
Apply a vacancy and credit loss factor to your gross rent. A typical Phoenix range is 5% to 8%. Use the higher end if the property has higher turnover risk, seasonal demand, or weaker tenant demand.
Result: Effective Gross Income (EGI).
3. Operating expenses
List all recurring costs that keep the property running. Phoenix-specific items to include:
- Property taxes
- Landlord insurance
- Owner-paid utilities
- HOA dues
- Routine maintenance and repairs
- Property management
- Replacement reserves or capital plan
- Miscellaneous admin, legal, or marketing
4. Net operating income
Subtract operating expenses from EGI. This gives you Net Operating Income (NOI). NOI is your property’s income power before financing.
5. Debt and returns
If you use financing, subtract annual debt service from NOI to get cash flow before tax. From there, you can calculate cash-on-cash return and other metrics based on your total cash invested.
Expense benchmarks to plug in
Use the ranges below when you do not have exact quotes. Replace them with property-specific numbers as soon as you can.
Property taxes
Arizona taxes are relatively low compared with many states. For Maricopa County, many investors model 0.5% to 1.0% of value if you do not have an exact bill. Always check the parcel on the Maricopa County Assessor to confirm the latest assessed values and estimated taxes. For broader context on state-level tax burdens, review the Tax Foundation’s property tax comparisons.
Insurance costs and coverage
Landlord policies vary with property type, replacement cost, pool presence, and local risk. A common underwriting range for a typical Phoenix single-family rental is $600 to $2,000+ per year. Pools and higher liability limits can push premiums higher. For consumer guidance and state averages, reference the National Association of Insurance Commissioners.
Utilities and summer cooling
Electricity drives Phoenix utility costs because of air conditioning in summer. If tenants cover electric and gas, landlords may still pay water, sewer, trash, and any HOA-shared utilities.
- Owner pays most utilities for a house: budget $200 to $400+ per month, with summer spikes likely.
- Owner pays water, sewer, and trash only: budget $50 to $150 per month, depending on lot size and irrigation.
Check local providers for rate plans and seasonal programs: SRP, APS, and City of Phoenix Water Services.
HOA fees and restrictions
HOA dues vary widely across the Valley.
- Condos and amenity-heavy communities: often $150 to $450+ per month.
- Single-family subdivisions: often $25 to $200 per month, with many basic communities at the low end.
HOA dues can materially reduce cash flow, especially on condos. Review CC&Rs for rental restrictions, minimum lease terms, and registration rules before you buy.
Maintenance, repairs, and reserves
A simple baseline is the 1% rule, or about 1% of property value per year for routine maintenance and small repairs. Another approach is $75 to $125 per month for a typical single-family home, then adjust up for older properties, pools, irrigated landscaping, or heavy HVAC use. Add an annual replacement reserve for big-ticket items, often $300 to $1,000+ based on age and systems.
Phoenix notes:
- AC systems work hard in summer. Budget for more frequent servicing and eventual compressor or full system replacement.
- Pools add appeal but also $75 to $200+ per month in recurring care, plus potential insurance and liability costs.
- Plan for pest control where needed.
Property management and turnover
Full-service long-term management in Phoenix commonly runs 8% to 12% of collected rent. Many firms also charge a lease-up fee, often 50% to 100% of one month’s rent or a flat fee. For vacancy and marketing, a conservative underwriting allowance is 5% to 8% of gross rent. Budget $500 to $2,000 per turnover for cleaning, paint, and minor repairs, depending on size and condition.
Climate and local rules
Heat, HVAC, and pools
Extreme summer heat affects tenant preferences, utility bills, and system wear. Good HVAC maintenance and communication around thermostat use can support satisfaction and renewals. If you buy a home with a pool, model the monthly service cost and any insurance impact up front.
Water and landscaping
Phoenix and many nearby cities use tiered water pricing. Irrigated lawns and lush landscaping can increase bills, while xeriscaping can lower costs. Factor your lot size and irrigation needs into owner-paid utilities. For rate schedules and conservation programs, check City of Phoenix Water Services.
Landlord-tenant law, HOAs, and risk
Arizona has no statewide rent control. Lease terms, deposits, notices, and remedies follow the Arizona Residential Landlord and Tenant Act. Review the statute or consult counsel before you finalize lease templates. You can read Title 33 at the Arizona Revised Statutes.
In HOA communities, verify rental caps, minimum lease terms, and any registration or fee requirements before you go under contract. For physical risk, confirm whether the property is in a flood hazard zone using the FEMA Map Service Center. Some fringe areas may also have elevated wildfire risk, which can influence insurance availability and cost.
Worked example
Here is a simple illustration to show the workflow. Replace these placeholders with your actual comps, quotes, and tax bill.
- 3-bedroom single-family home, market rent $2,000 per month
- Gross Scheduled Rent (GSR): $24,000 per year
- Vacancy allowance 6%: EGI = $22,560
- Expenses:
- Property tax at 0.7% of $350,000 value: $2,450
- Insurance: $1,200
- Maintenance and repairs at 1% of value: $3,500
- Property management at 9% of rent collected: about $2,030
- Owner-paid water and trash: $1,200
- HOA: $0
- Replacement reserves: $600
- Miscellaneous: $300
- Total operating expenses: about $11,280
- Net Operating Income (NOI): about $11,280
If you finance the purchase, subtract annual debt service to see cash flow before tax. Then compute cash-on-cash using your actual cash invested.
Where to get numbers
Use these sources to ground each assumption in local data:
- Taxes and parcel data: Maricopa County Assessor
- Insurance averages and guidance: National Association of Insurance Commissioners
- Electricity rates and plans: SRP and APS
- Water and sewer rates: City of Phoenix Water Services
- Landlord-tenant law: Arizona Revised Statutes, Title 33
- Flood risk: FEMA Map Service Center
- State tax context: Tax Foundation property tax comparisons
If you want a second set of eyes on your model, local comps, or HOA and lease considerations, connect with a trusted advisor who works these numbers every week in Maricopa County. For tailored guidance on your next purchase or sale, reach out to Jennifer Rogers.
FAQs
What vacancy rate should I use for Phoenix rentals?
- A common underwriting range is 5% to 8% for long-term Phoenix rentals. Use the higher end for seasonal or higher-turnover properties.
How much should I set aside for maintenance in Phoenix?
- Many investors reserve 1% of property value per year or $75 to $125 per month, then increase for older homes, pools, irrigated yards, or heavy AC use.
Who typically pays utilities in Phoenix long-term rentals?
- Many leases have tenants pay electric and gas. Landlords often retain water, sewer, trash, irrigation, and any HOA-shared utilities, so model those owner costs.
How do HOA fees affect rental cash flow in Phoenix?
- HOA dues can be significant, especially for condos and amenity-rich communities. Always include the full monthly fee and verify rental restrictions in the CC&Rs.
Which local sources should I use to verify my numbers?
- Check the Maricopa County Assessor for taxes, SRP or APS for electricity, City of Phoenix Water Services for water and sewer, and Arizona Revised Statutes for landlord-tenant law.
