Reasons Why Scottsdale, AZ Stands Out for Short Term Rentals

Reasons Why Scottsdale, AZ Stands Out for Short Term Rentals

Senior Loan Officer
Brian Decker
Published on October 31, 2022

Reasons Why Scottsdale, AZ Stands Out for Short Term Rentals

As stated before, there are several factors you should consider before investing in the real estate industry. Here are a few reasons Scottsdale stands out for short-term rentals. As the market across the US sees more inventory coming to market, the opportunity for purchasing a short-term rental becomes a great reality.

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Real Estate Laws

Popular cities such as New York, San Francisco, and LA have banned Airbnb practices; however, Scottsdale and Arizona are still open for business despite the recent backlash.

Laws about Airbnb are managed at the HOA level, but several areas, such as Old Town Scottsdale, don't have HOAs. Old Town Scottsdale is one of the popular Airbnb spots in Arizona, generating more than $60,000,000 in revenue for the year ending 2021. Arizona also recently passed a law prohibiting an HOA from adding to its bylaws banning short-term rentals. So if an HOA does not currently have a law banning short-term rentals, they can NEVER add one.

These figures form a huge chunk of Arizona's total tax revenue. Despite various litigations against the practice in Scottsdale, it's unlikely for any action to materialize soon. This means you can invest and earn your returns without worry. However, when looking to purchase an Airbnb in Scottsdale, it is ESSENTIAL you work with a great realtor.

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If you want to know the realtor who I personally use in Scottsdale, just email me at decker@Modenteam.com.

Tourism

Arizona is one of the top tourist destinations in the country, famous for its picturesque scenery. It's also frequented for its perfect weather, with residents enjoying six months of warm climate. Areas such as Old Town Scottsdale are famous for eclectic and diverse venues that offer something for everyone, young and old.

Your Airbnb can thrive in such a location due to the high number of tourists visiting the region and travelers taking a break on their way to the west or east coast. Between various concerts, the upcoming Superbowl, the Waste Management Golf Tournament, and baseball spring training, occupancy rates are very high in Scottsdale. Like Nashville, it is also a hot spot for bachelor and bachelorette parties.

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Location of Amenities

The availability of amenities forms the foundation for any Airbnb business. Before investing in an Airbnb property, you need to consider proximity to amenities. Tourists engage in various activities on their visits to new places, including exploring nightclubs to dance the night away.
However, you should locate yourself close to other fun things the city offers. Scottsdale prides itself on various fun activities and destinations, including casinos, hiking, art galleries, spring training, fine dining, top golf, and exquisite breakfast options, all within a five-mile radius of Old Town Scottsdale.

When choosing a property for your business, you need to consider this. The more amenities guests can access from your location, the higher your occupancy level. The availability of several amenities within a close range is one factor that maintains Scottsdale's occupancy rate at 63% against the national average of 48%. If you have a pool this increases to 71% on average.

Impressive Profitability

One of the main factors drawing people to Airbnb is the profit margin since rent is collected on a nightly basis instead of monthly payments. The impressive profitability is another reason hosts in Scottsdale choose to invest in the practice. On average, the rental income from Airbnb is $4,215/mo based on 2021 figures.

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Investing in an Airbnb in Scottsdale will likely generate more revenue than monthly collection. The price margin varies from one location to another, with the best neighborhoods fetching higher rates.

A year-round supply of tourists supports the high Airbnb occupancy rate in Scottsdale. Below is a breakdown of Scottsdale Airbnb short-term rentals:

  • Airbnb investing
  • Rental income: $2,788
  • Occupancy rate; 68%
  • Cap rate/ Cash on cash return: 6.8%

Arizona Economy

The real estate industry in Arizona has been on an upward trajectory since the mortgage crisis of 2008 that affected the price of homes. In the last decade, Arizona has witnessed a 88% increase in the average home value, averaging 8.6% yearly returns.

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The recent economic crisis that hit the world did little to discourage investors and major companies from relocating to Arizona. This is mainly because the crisis was tied directly to the 2019 coronavirus.

This migration is influenced by the business-friendly environment witnessed in Scottsdale and Arizona. In addition, a stable economy has also attracted a huge population of people looking to relocate and settle.

The high population has caused demand for housing to skyrocket, making it difficult for builders to keep up with the available housing inventory and unable to satisfy demand.
Rental and median home prices are expected to rise in the future, making it a perfect location to invest in an Airbnb.

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Airbnb Investment: Pros and Cons

As mentioned before, the real estate market, especially for short-term rentals, is booming in Scottsdale, AZ, which is growing to be more competitive and lucrative.

Despite guaranteed ROI, new trends are marking this venture more challenging to enter. For example, visitors now expect hotel-like amenities and services with a personal touch, something most homeowners cannot provide. Moreover, the rising standards give rise to the following pros and cons.

Pros

  • Less reliance on long-term clients
  • Higher profits
  • Less effort to find renters
  • Use cost segregation tax strategies which can get you up to 20% to 30% of the total cost of the home + furnishings as a tax deduction (see CPA for details)
  • Take advantage of high-season weekends like the Super Bowl, WM Golf Tournament, Barrett Jackson auto auction, spring training, and much more.

Cons

  • High upfront cost due to furnishing
  • Time-consuming in terms of management or you can pay 20% to a management company
  • Less security for long-term tenants

Type of Property

The most important factor you need to consider when investing in Scottsdale Real Estate is the type of property you are buying, a house or condo. Condos give you access to locations such as Mill Ave, Old Town Kierland, Tempe Town Lake, and Downtown at a lesser price compared to a single-family home.

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A condo comes with several units and amenities your guests can enjoy, unlike sing-family homes where you are restricted to a few guests per night. Nevertheless, the type of property you choose should align with your investment goals.

Personally, I really like a 5bd property when one can be afforded as the average daily night rate is 30% higher than a 4bd home and 60% higher than a 3 bedroom home.

Competition

It's no secret that there are several hosts in Scottsdale, all looking to benefit from the practice. You need to set yourself apart from your completion by developing unique ideas in terms of marketing and presentation.

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The success of an Airbnb is pegged on the reviews guests leave. You need to impress your guest during their visit for them to recommend your home to people in their circles. Some areas that need work include the quality of bedding you provide, bath accessories, and customer service.

You should also improve the staging of the property and use professional photos for advertisement. During their stay, provide guests with a list of local vendors, attractions, and popular destinations they can explore during their stay.

Legal Status of Airbnb in Scottsdale

Airbnb practice has come under heavy fire, with several cities across the country banning it. However, it is still legal in Arizona under state law. Authorities legalized short-term rental across the state, providing an opportunity for Airbnb to thrive.

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However, before staging your property, you need to observe Scottsdale regulations concerning Airbnb. The law allows for a maximum family size of 6 adults and their dependent children for a single unit. You should also be ready to pay short-term rental taxes, which include:

  • Transaction privileges Sales Tax- 5.6%
  • City Transaction Privilege Sales Tax- 1.75%
  • City Transient Tax- 5%

Conclusion

Nowadays, Airbnb’s are very popular, and investing in Scottsdale is a fantastic choice as it can provide a high rate of return.

If you want to invest in an Airbnb and are worried about not showing enough income due to being self-employed or just needing the prospective income generated from Airbnb to qualify. You need to check out our new AirBnB Portfolio Mortgage loan.

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With this program, we get to use www.airdna.co which shows what the property would generate in terms of rental income and use that to qualify.

As long as your credit score is 680 or greater and you have 20% to 25% for your down payment (the same that is needed for a conventional mortgage), you have to check out the program.

No income documents are needed, and rates are only 0.5-1% higher than a normal conventional loan.

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For details on this program just email me at decker@modernteam.com or click the link below to fill out a quick form to get some details.

Example of Airbnb in Scottsdale:

I used a very conservative occupancy rate at only 53%, well below the average, and the property still works great!

This property with 25% down would cash flow about $4,000-$5,500/mo after paying the mortgage and all expenses when self-managed.

Verify my mortgage eligibility (Dec 7th, 2022)

Verify my mortgage eligibility (Dec 7th, 2022)

If you’re interested in financing a second home, a short-term rental, or Airbnb, please click the link below to start your journey today!

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Senior Loan Officer
Brian Decker Senior Loan Officer
Click to Call or Text:
844-4-Modern

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