Rental property investing in Arizona: cash flow, taxes, and what to expect

The Arizona setup, at a glance

Arizona sits at roughly 0.62% effective property tax, which matters more than most new investors realize. On a $380k-$500k Phoenix property, that's about $2,356/year in taxes alone - call it $196/month before you've paid anything else. Run the rental cash flow calculator with that line item baked in or your projection will look better than reality.

Eviction stance here is landlord. Landlord-friendly. 5-day notice for non-payment, complaint after, hearing in ~7 days, writ in 5. Some of the fastest evictions nationally - 21-28 days uncontested. That timeline directly affects your vacancy assumption: in landlord-friendly states like Arizona, you can underwrite 5-7% vacancy on B-class properties; in slower states you'd want 8-10%.

Where the math actually pencils

Phoenix - $380k-$500k for typical SFR, $1,800-$2,300/mo for 2-3BR rents. STR-heavy market, regulations tightening, cooling appreciation.

Tucson - $270k-$360k for typical SFR, $1,400-$1,800/mo for 2-3BR rents. university + military, more cash-flow friendly than Phoenix.

Mesa - $380k-$480k for typical SFR, $1,750-$2,200/mo for 2-3BR rents. family-rental sweet spot, A/B class neighborhoods.

The 1% rule (monthly rent >= 1% of purchase) is a smoke test only, but it filters fast: a $380k-$480k property in Mesa renting at the high end (2,200/mo) clears 0.8-0.9% in most cases, so you're already in the "needs the rest of the math to be tight" zone before vacancy + capex + management.

Arizona-specific things that bite

Low property tax helps but insurance + HOA dues can eat the difference. Phoenix STR market has cooled hard since 2023 - don't underwrite to 2022 ADRs.

A few cash-flow-killer line items that catch out-of-state buyers in Arizona:

Property tax escrow. Lower than the national 1% average, but the homestead exemption you'd get as an owner-occupant doesn't apply to rentals.
Insurance. Standard hazard policies are still reasonable here, but ask about wind/hail riders depending on the specific zip.
PM costs. 8-10% of collected rent is typical. On a $1750/mo property that's $158-175/mo - works out to about a month of vacancy each year.

What "good enough" looks like in Arizona

For a stabilized buy-and-hold in Arizona, the rule-of-thumb deal targets most investors I see are:

Cap rate: 6%+ on the actual NOI (not the broker's pro forma). Below 5% and you're paying for appreciation, which is fine if that's your thesis.
Cash-on-cash: 8-10% minimum at year 1 with 20-25% down. 12%+ is solid for the work.
DSCR: 1.25+ if you're using a DSCR loan. Lenders increasingly want 1.2 as a floor, 1.25 to clear comfortably.
Reserves: 6 months of PITI. Even with Arizona's fast eviction, you'll burn 1-2 months on turnover + repairs in a bad year.

The play that works here

Arizona has tilted toward appreciation rather than cash flow in most major metros. Cash-flow seekers usually need to look at secondary cities or accept lower CoC for the appreciation thesis.

Run your specific deal through the rental calculator with the state's effective tax rate (0.62%), realistic Arizona insurance quotes, and 8-10% PM. If it still pencils after that, you've got a deal.