Why Tucson, Arizona Has Become an Investor’s Paradise
Located about two hours southeast of Phoenix and an hour north of the U.S.-Mexico border, Tucson’s economy is a large driver behind the city’s real estate market growth. Tucson’s economy is a diverse blend of private and public business sectors including education, aerospace, biotech, and defense.
Tucson is home to six Fortune 500 companies, and the city’s top employers include the University of Arizona, Davis-Monthan Air Force Base, the state of Arizona, and the U.S. Border Patrol.
One factor driving growth in Tucson’s real estate market is the growing number of people leaving larger cities and relocating. In 2021, with working remotely growing in popularity, Tucson became a popular exurb spot for people seeking more affordable living options, making it an excellent choice for those interested in investing in rental properties.
The Tucson Association of Realtors reported strong residential real estate activity in March 2022. Home prices were up compared to last year. The median home price of single-family homes increased to $371,570 – an 18% increase YOY.
Tucson is currently a hot seller’s real estate market, with demand from buyers exceeding the current supply of homes for sale. Currently, Tucson has 0.7 months’ supply of inventory, meaning it would take less than three weeks for the current inventory to sell given the current pace.
The supply shortage and increased demand will continue to push home prices higher in Tucson’s market, which could create problems for would-be homebuyers. But interested investors in The Old Pueblo rental properties, it means that filling rentals shouldn’t be a problem.
A Thriving Real Estate Market
Southern Arizona’s real estate market has been booming, and housing experts predict strong growth in the Tucson housing market in 2022, albeit at a more moderate level than last year.
A Redfin report shows that Tucson is ranked no. 9 nationally among cities with the highest bidding war rates. In July 2021, 68% of Redfin offers in Tucson faced bidding wars. Comparatively, in Phoenix during the same time, only 53% of Redfin offers faced bidding wars.
With diminishing inventory and increasing home prices, many first-time homebuyers are opting to rent in Tucson instead. For many, renting is a more affordable option than buying a home in Tucson, making the market a good choice for real estate investors looking to buy and hold property in the area.
Tucson’s Growing Rental Market
The Tucson housing market is a mixture of owner-occupied and renter-occupied units. Single-family homes are the most common type of housing in Tucson, and 45% of the city’s population rents, according to RentCafe, making it one of the state’s best places to buy rental property.
Arizona ranks as the 15th most expensive state for renters, with an average rent of $1,446. Tucson, however, boasts an average monthly rent of $1,233. Even with a 20% increase from March 2021 to March 2022, Tucson ranks as the 16th most affordable city out of the 55 major metros analyzed for rent increases.
With Tucson’s relative affordability, demand for single-family home communities is growing, and developers are taking notice. Between American Homes 4 Rent and Las Vegas-based Moderne Communities, several hundred build to rent units are under construction around Tucson.
What Does This Mean for Investors?
Tucson has one of the best rental markets in the U.S. Its build to rent growth, affordable rent prices, and surging demand creates the perfect opportunity for investors looking to move into the city’s real investment market.
There are several private lenders in Arizona, but when investors are considering building to rent loans, it’s important to select the right lender. That’s where Lima One Capital comes in. Our rental and new construction loans are some of the most competitive in the industry and our hard money lenders in Arizona are unbeatable.
We are the premier lender for real estate investors in Arizona and across the country. As experienced lenders in the private lending space, we’re able to help you find the rental property loans that fit your investment strategy, while providing you with best-in-class customer service. As experienced rental property lenders, we’re able to assist you every step of the way with rental property financing, whether you’re interested in the Tucson, AZ real estate market or elsewhere.