Arizona's strong economy, consistently sunny weather, and relative affordability makes it an attractive option for real estate investors. If you've been thinking about investing in the Grand Canyon State, we've narrowed down our top five real estate markets to invest in and shared our best tips for finding cheap properties.

Overview of Arizona real estate trends

Arizona's population increased by about 750,000 residents between 2010 and 2020. It remains one of the fastest growing states in 2022, with approximately 17% of newcomers moving in from California. Major companies like Tesla and Oracle have also contributed to the state's growth by relocating their headquarters to Arizona.

According to the 2020 Census, Arizona's average price-to-rent ratio is around 19. This means that it's more advantageous to rent than own a home for most residents. This is great news for investors, whether they're looking to invest in a traditional home to rent out or an entire apartment building.

Although the demand for housing is high, median home prices are relatively affordable compared to other states.

Top 5 Arizona real estate markets in 2022

Ultimately, the best investment market for you depends on your personal goals. If you want to flip a home, you probably won't be looking for the same criteria as a vacation property investor.

Some investors focus on appreciation to avoid paying capital gains? every year, whereas others like the steady stream of income that comes from long-term rentals. We've identified some of the best investment markets for multiple strategies below, but you can also use our rental property calculator to evaluate individual properties.

To find the best real estate investment market in Arizona, we compiled data across the state. We evaluated property appreciation rates, affordability based on average income, and profitability based on the costs of renting versus buying a home. Learn more about our methodology.

» LEARN: Real Estate Investing — A Complete Guide To Getting Started

Phoenix: Best overall

Phoenix property values increase by an average of 17.43% year-over-year, and the city boasts the highest rent-to-mortgage ratio in the state — 75.8%. It has the fastest-growing population in Arizona, and the city also attracts thousands of tourists every year. This makes it a viable option for all kinds of investors.

Market experts predict that property values will keep increasing over the next couple years. Investors should jump at the opportunity to buy real estate in Phoenix while the market is still relatively affordable.

Lake Havasu City: Best for vacation rentals

Dubbed "Arizona's Playground," Lake Havasu City is perfect for vacationers who want to have fun in the sun. Located near historic Route 66, this getaway destination attracts everyone from hikers and fishers to curious folks who want to know why the London Bridge ended up in the Mojave Desert.

In addition to all the fun activities to enjoy in Lake Havasu City, there are exciting opportunities for investors, too. Lake Havasu City's rent-to-mortgage ratio is 75.2% — just slightly below Phoenix — and home values increase by an average of 17.72% year-over-year.

Although Lake Havasu City and Phoenix both have the same rent-to-income ratio of 21.1%, this city has a higher median resident age (52.3 years old) compared to 36.9 years old in Phoenix. It also has a much smaller population, with just 55,463 residents according to 2020 data from the U.S. Census.

Due to its broad appeal to visitors, Lake Havasu City is an ideal location to invest in vacation rental properties to accommodate the steady stream of tourists and renters.

Safford: Best for landlords

The city of Safford has the lowest rent-to-income ratio in the state at just 17.8%. This low number means it's easier for the average renter to make consistent payments on time. Landlords hoping to purchase apartments or homes to lease long-term can expect to find plenty of financially stable tenants here.

With a population of around 10,000, Safford is a quieter town that attracts long-term residents. The city has above-average public schools, several parks and hiking trails, and low crime rates. This makes Safford highly appealing to young families and anyone who enjoys a quieter, more rural environment.

Payson: Best for house flippers

Payson has the highest annual property appreciation rate in Arizona at 34.01%. House flippers can purchase an undervalued home here in the "Heart of Arizona" and easily resell the property for a high profit.

Payson has more homeowners than renters, which signifies that most people in this area are seeking to purchase instead of rent. If your goal is to buy, flip, and resell homes, you should definitely consider investing in this region.

Additionally, Payson has a higher median resident age at 50.4 years old. This means people are likely looking to downsize to smaller homes and single-level living. House flippers can take advantage by updating older homes to make them low-maintenance and appealing to an aging demographic.

» MORE: The Ultimate Guide to Flipping Houses in Arizona

Flagstaff: Best for maximizing profits

Located in northern Arizona, Flagstaff is perfect for anyone who enjoys all four seasons. This hidden gem is one of the snowiest cities in the U.S., averaging over 80 inches of snowfall annually.

Flagstaff has one of the highest median home values in the state, with an average house costing around $631,745. Additionally, Flagstaff properties still increase in value significantly from year-to-year at a rate of about 23.14%.

This city has the most expensive rental rates out of the Arizona markets we researched, but it's still more affordable than the national average. With its urban feel and plethora of activities to enjoy, Flagstaff has seemed to attract younger renters, with the average resident being around 31 years old.

Based on the high rent prices and high home appreciation rates, investing in Flagstaff will likely pay off quickly for investors.

How to find undervalued Arizona properties

The best deals in Arizona are usually homes that only need cosmetic repairs, or homes with motivated sellers. Types of homes that make good flips often include foreclosures, pre-forecloses, short sales, and abandoned or neglected properties. Here's how to find them.

1. Use real estate investment software

One of the biggest challenges of flipping homes or finding rental properties in Arizona is finding great deals. But the DealMachine app is one tool that can really help you.

DealMachine's real estate software helps Arizona investors find distressed homes (such as pre-foreclosures, foreclosures, or short sales) and get in touch with owners fast via batch skip tracing and direct mail campaigns.

DealMachine's driving for dollars app is fast and easy to use. When you're driving around town and spot a home that could be a great deal (maybe it's been abandoned or neglected), you can send the owner direct mail through the app for huge time savings (no post office visits required).

Download the DealMachine app to find undervalued Arizona properties as you drive. DealMachine offers a 7-day free trial and $15 in free credits that can be used towards marketing (like sending out direct mail to homeowners).

Other popular real estate software or websites for flippers to consider include:

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  Flipster: Primarily targeting house flippers, this app helps users find motivated seller leads, while also providing valuable comparable property information to help you estimate a home's fair market value before making an offer.

  
  


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  Flipperforce: The Flipperforce app helps BRRRR method investors analyze home values to calculate the maximum purchase price to offer on a property before making a purchase.

  
  


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  Stessa: Stessa's software allows you to easily track the performance and financial status of all your properties in one easy-to-use app. It provides regular reports on how profitable your properties are and can be linked to your financial accounts for automatic updates.

  
  

2. Look for FSBO homes

Investing in a FSBO (for sale by owner) property may get you a better deal since you'll be negotiating directly with the seller instead of a listing agent. Many FSBO sellers are more concerned about selling quickly than earning the highest possible profit, which can help you keep more money in your pocket.

Zillow's foreclosure center is one great resource for finding foreclosed and bank-owned properties in your area. However, unlike off-market properties you'd find on DealMachine and other software, most of Zillow's properties are publicly listed — meaning you'll likely face stiff competition from other investors.

» MORE: Use Clever's rental property calculator to evaluate off-market deals

3. Partner with an investor-friendly agent

Using an experienced realtor is the best way to ensure a favorable, easy home purchase.

Great agents understand Arizona's different investment markets, are familiar with real estate laws, and can provide access to lesser-known neighborhoods to help you discover your dream investment property.

Clever's real estate agents can guide you through Arizona's real estate market and make your house hunting journey a breeze. Eligible buyers can even get cash back on their home's purchase price after closing.

Methodology

We used data from the U.S. Census Bureau to determine which cities offer the greatest investment opportunities. For each city, we considered the median mortgage cost, average rent prices, median household income, and annual property appreciation statistics.

We also considered how successful different types of investments — such as house flipping, vacation rentals, and traditional single-family homes — may be in each market to help investors reach their goals.