Reasonable ROI Expectations in Phoenix Real Estate

The Phoenix real estate market remains as much myth as reality these days; the phones still ring with potential buyers who have heard foreclosures are “inexpensive” compared to regular homes and want to drop their cash into the market to purchase $20,000 properties that simply don’t exist.

Though inventory has continued to rise over the past six months – 11,173 single family detached homes for sale in Maricopa County and counting – median prices also have continued to rise because of the pent-up demand caused by inventory below the 10,000 mark for months.

The rental market remains strong for the sheer volume of renters, a demographic which has been swollen by folks who have gone through foreclosures or short sales and still need a place to live.

Prices, inventory and rental rates have changed quickly enough that it’s often challenging to get a handle on what reasonably can be expected in terms of return.

Yesterday, I was running some numbers in Gilbert for a client and for the most part we were looking at a gross return of about 8 percent. (It helps that I started the search with a certain rent in mind, then worked backward to find the price point that was going to generate that number.)

While far from guaranteed, the 8 percent is fairly consistent across much of the Valley. There are some higher pockets to be found, for those who are ready for the adventures that come with lower-priced homes and lower rents that percentage wise actually are a little better than the norm. And there certainly is worse to be found, particularly in cities with sexy ZIP codes where the prices are sharply higher but the rents aren’t.

Now, the question becomes, does 8 percent gross – before calculating for vacancies, management fees, maintenance, etc. – still get you excited as an investment? If it does, then this is the part of the show where we ought to have a conversation. If it doesn’t, we still ought to talk as there are folks out there who can find some higher returns in markets outside Arizona.

The conversational ball, as it were, is in your court.

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at