Phoenix Short-Term Rentals Yield 8.7%, Nearly Double Long-Term

Estimates for a typical 3-bedroom house. Figures are modelled from market data; not guaranteed outcomes.

Short-term rental grosses approximately 88% more than long-term rental on a typical Phoenix 3-bedroom house. However, short-term rental operating costs are substantially higher, narrowing the gap at the net level.

Short-term rental only outperforms long-term rental if occupancy exceeds 27%. With Phoenix averaging 50%, there is a comfortable margin above break-even, making short-term rental the stronger gross-revenue strategy across most of the metro.

Occupancy Swings Drive the Real Short-Term Rental Return in Phoenix

Occupancy is the single biggest variable in short-term rental returns. Long-term rental income is essentially fixed once a tenant is in place, but short-term rental income swings dramatically with occupancy. Here is what the numbers look like at different occupancy levels using Phoenix's average nightly rate of $252:

• At 35% occupancy (slow season): gross revenue drops to around $28,892, still above long-term rental's $20,865 but with much higher costs eating into the margin.
• At 50% occupancy (market average): gross revenue reaches $41,367, comfortably ahead of long-term rental.
• At 60% occupancy (peak performance): gross revenue climbs to approximately $49,684, more than double the long-term rental figure.

Phoenix's winter snowbird season drives strong demand from November through April, but summer months can see occupancy dip sharply. The annual average of 50% masks this seasonality, which is why modelling your specific property's location and seasonal profile matters.

Yield Varies Widely Across Phoenix's 133 ZIP Codes

The metro-wide averages obscure substantial variation across Maricopa County's 133 ZIP codes. Prices range from $165,497 to $4,425,000, and yields shift accordingly.

The top-yielding ZIP codes tend to be lower-priced areas where rents haven't compressed as much relative to property values. The highest-yield area, Gila Bend (85337), returns 8.2% gross, while premium areas like Sun City (85351) sit closer to 7.1%. That spread matters enormously for investors deciding between cash flow and appreciation.

These are averages per suburb. The dashboard breaks it down further, by bedroom count and property type, so you can model your specific property.

View Phoenix in the dashboard → Free preview · every bedroom count and property type

Phoenix's Premium Prices Mean Investors Are Betting on Growth, Not Cash Flow

Phoenix is an appreciation play. At a median 3-bedroom price of $473,700, the market sits well above the Arizona state average of $340,000 and the national average of $242,500. Those elevated prices compress gross yields: long-term rental returns 4.7%, which sits below the national median of 5.3%.

Investors buying in Phoenix are paying a premium for population growth, job diversification (semiconductors, tech, healthcare), and Sun Belt migration trends. The trade-off is clear: thinner yields today in exchange for capital gains over a longer hold period. For pure cash flow investors, markets elsewhere in Arizona offer more immediate returns, but they lack Phoenix's liquidity and growth trajectory.

Short-term rental improves the income picture considerably, with gross yields reaching 8.7%. That narrows the gap with the national average and makes the investment pencil out more quickly, provided the operator can maintain occupancy above the 27% break-even threshold.

Arizona's Investor-Friendly Rules Keep Short-Term Rental Viable

Arizona is one of the most permissive states in the country for short-term rental investors. State law (SB 1350) explicitly prevents cities from banning short-term rentals, meaning Phoenix cannot restrict the practice the way cities like Nashville or New York have. The city does require a permit ($250), registration, compliance with safety standards, and collection of lodging taxes, but these are administrative hurdles rather than substantive barriers.

There is no night cap on short-term rentals in Phoenix. Investors can operate year-round, which is reflected in the 330 available nights used in our modelling (accounting only for maintenance and turnover gaps, not regulatory limits). This is a significant advantage compared to markets with 90-night or 180-night caps where short-term rental revenue is structurally limited.

The lodging tax of 5.5% (state rate, with local additions bringing the total to roughly 5.5% to 13.0% depending on location within Maricopa County) is an additional cost on short-term rental income. Factor this into your net calculations alongside platform fees and management costs.

Operating Costs Narrow Short-Term Rental's Lead Over Long-Term Rental

Short-term rental grosses approximately 88% more than long-term rental, but operating costs tell a different story. Annual costs for short-term rental run roughly $23,905 compared to $8,064 for long-term rental. Here is where the money goes:

Short-term rental annual costs:

• Airbnb host fee (15.5% of gross): $6,412
• Management fee (around 22% of gross): $9,101
• Insurance: $2,921
• Maintenance (includes furnishing replacement): $4,619
• Cleaning: $105 per turnover
• Upfront furnishing: $20,250

Long-term rental annual costs:

• Management fee (around 9% of rent): included in total
• Insurance: $1,421
• Maintenance: lower than short-term rental due to less turnover

Both strategies carry property tax of 0.4% (approximately $2,024 annually). After all operating costs, net income drops to roughly $17,462 for short-term rental and $12,801 for long-term rental, translating to net yields of 3.7% and 2.7% respectively. Short-term rental still leads, but the margin is much thinner than the gross numbers suggest.

Tax Benefits Improve the Picture for Phoenix Rental Investors

Arizona has no state income tax on rental income for individuals (the state transitioned away from individual income tax on rental income to a flat transaction privilege tax structure), which is a meaningful advantage compared to high-tax states. Federal tax treatment further improves returns for both strategies.

Depreciation is the most significant tax benefit. The IRS allows investors to depreciate the building value (80% of the purchase price, approximately $378,960 on a typical Phoenix 3-bedroom) over 27.5 years. That creates an annual paper deduction of roughly $13,780, which can offset rental income and reduce your federal tax bill substantially. In many cases, depreciation alone exceeds the net operating income, creating a paper loss even while the property generates positive cash flow.

Mortgage interest is fully deductible on Schedule E for rental properties (the SALT cap that limits deductions on primary residences does not apply here). For highly leveraged investors, this further reduces taxable income.

Short-term rental operators who materially participate in managing their properties may qualify for active loss treatment, allowing them to deduct losses against ordinary income rather than only against passive income. This is a meaningful distinction for investors who self-manage. Long-term rental income is typically treated as passive unless you qualify as a real estate professional.

For investors planning to exit, 1031 exchanges allow tax-deferred swaps into replacement properties, preserving capital that would otherwise go to capital gains taxes. Given Phoenix's appreciation trajectory, this is a commonly used strategy in the market.

Phoenix Yields Less Than Arizona's Smaller Markets but Offers More Stability

Comparison of key investment metrics.

Phoenix's long-term rental gross yield of 4.7% sits below the national median of 5.3%. That's the price of buying into a major metro with strong appreciation fundamentals. Smaller Arizona markets in Mohave, Pinal, and Yavapai counties offer higher yields, but they come with less liquidity, weaker tenant demand, and more volatile appreciation.

Where Phoenix compensates is in rental demand depth. Maricopa County's population growth, diverse employment base, and steady migration from higher-cost metros (Los Angeles, San Francisco, Seattle) create resilient tenant demand for both long-term and short-term rental. An investor accepting 4.7% in Phoenix is buying stability and growth that a higher-yielding rural market simply cannot match.

For short-term rental specifically, Phoenix's tourism appeal (spring training, golf, desert resorts, snowbird season) provides a demand floor that many comparable Sun Belt metros lack. The 8.7% gross yield on short-term rental compares favourably to other premium markets where regulatory restrictions limit revenue potential.

Investment Bottom Line: Phoenix Rewards Patient, Active Investors

Phoenix is not a cash flow market at today's prices. With net yields of 3.7% for short-term rental and 2.7% for long-term rental, investors are relying on appreciation and tax benefits to deliver the total return. The market rewards investors who take a long-term view and use leverage strategically, with depreciation deductions of $13,780 annually helping offset the modest cash flow.

Short-term rental is the higher-returning strategy, grossing 88% more than long-term rental, with a break-even occupancy of just 27% providing a wide safety margin. Arizona's investor-friendly regulatory environment, with no night caps and state-level protections against municipal bans, makes this one of the more secure markets for short-term rental operators in the US.

The critical decision, though, is not just short-term versus long-term rental. It's which ZIP code you buy in. With yields ranging from 8.2% in Gila Bend (85337) down to lower single digits in premium Scottsdale locations, the suburb-level analysis matters far more than the metro average.

Data reflects market conditions as of April 2026. For data sources and market score methodology, see our methodology pages.

This information is for educational purposes only and should not be considered financial or legal advice. Regulations and market conditions change frequently. Verify current rules with local authorities before making investment decisions.