Investing in real estate can be one of the most effective ways to build long-term wealth. But doing it from a distance, especially in a state you don’t live in, adds layers of complexity that many first-time investors don’t anticipate. Arizona, with its growing population, strong job market, and attractive climate, is on the radar of many out-of-state investors. Before you jump in, here’s what you really need to know to invest smartly and confidently.
Why Arizona? A Quick Market Overview
Arizona has been one of the fastest-growing states in the U.S. for years, attracting residents from California, the Midwest, and beyond. Cities like Phoenix, Tucson, and even smaller markets like Mesa and Chandler have seen rising home prices and strong rental demand.
This growth is driven by several factors:
- Population Influx: People moving for jobs, lower cost of living (compared to some coastal states), and desirable weather.
- Job Growth: Expanding industries in tech, healthcare, education, and services.
- Affordable Entry Points: In many areas outside the core urban zones, prices are still reasonable relative to long-term value potential.
For an out-of-state investor, these factors can translate into both capital appreciation and consistent rental income—if you execute the investment right.
Understand Arizona’s Legal & Tax Environment
State Taxes and Property Tax
Arizona is considered relatively tax-friendly:
- No Estate Tax: Unlike some states, Arizona doesn’t impose an estate tax.
- Property Taxes: Rates tend to be lower than the national average, although they vary by county and city.
- State Income Tax: Arizona has a graduated income tax, so rental income may be subject to state tax.
Work with a tax professional who knows both your home state and Arizona laws. You’ll want to plan for:
Reciprocal tax issues between states
State filing requirements
Depreciation benefits
Deductions for interest, repairs, management fees
Financing From Out of State: What to Expect
Traditional Mortgage vs. Portfolio Loan
If you’re planning to finance the property, you may face stricter requirements because you’re out of state.
- Traditional Conventional Loans: Many lenders will extend typical mortgages to non-resident investors, but they may require a higher down payment (often 20–25% or more).
- Portfolio Loans or Local Lenders: Some Arizona banks or credit unions offer investor-friendly loans that they keep in-house. These can be a good option if you want personal service and local expertise.
- Cash Offers: If you’ve got the capital, paying cash can strengthen your offer and streamline the process—especially in competitive markets.
Tip: Get pre-approved before house hunting. A local lender or mortgage broker familiar with out-of-state investors can make a big difference.
Hire a Local Real Estate Agent Who Understands Investors
This cannot be overstated.
A good local agent will:
- Know Neighborhood Trends: What areas are appreciating? Which have high vacancy rates?
- Understand Regulations: Some cities or HOAs have rental restrictions.
- Negotiate Offers: Especially important when you can’t walk through a property physically.
When interviewing agents, ask about:
Ability to coordinate inspections and other services
Track record with out-of-state investors
Knowledge of rental markets
Experience with investment property negotiations
Market Selection: Go Beyond Major Cities
Phoenix and Tucson get a lot of attention—and for good reason—but strong opportunities may also exist in surrounding markets:
- Mesa, Gilbert, Chandler: Suburban markets with growing employment centers and quality schools.
- Flagstaff: Popular with short-term rentals and outdoor enthusiasts.
- Yuma, Prescott: Smaller markets with specific niches (e.g., seasonal renters, retirees).
Each has unique dynamics:
- Long-term rentals: Stable income, lower turnover.
- Short-term rentals (Airbnb/VRBO): Higher revenue potential but more management and regulatory considerations.
Research vacancy rates, rent growth, and demographic trends before you pick a market.
Property Management: Your First Critical Partner
Since you’re not local, property management isn’t optional—it’s essential.
A good property manager will:
- Market vacancies
- Screen tenants
- Collect rent
- Coordinate repairs
- Handle evictions or disputes
What to Look For in a Property Manager
- Transparent fee structure (often 8–12% of monthly rent)
- Local reputation and references from other investors
- Familiarity with Arizona landlord-tenant laws
- Online owner portals and clear reporting
Ask prospective managers to walk you through a typical month and a worst-case scenario. How do they handle late rent? Emergencies? Maintenance quotes?
Understand Arizona Landlord-Tenant Laws
Real estate investing isn’t just about buying a property and collecting rent. You must comply with state and local laws, which vary significantly by locale.
Important areas include:
- Security deposit limits and handling
- Required disclosures
- Repair timelines
- Eviction procedures
Arizona is generally considered landlord-friendly, but procedures still exist for due process. Your property manager should help with compliance, but it’s wise to have your own understanding—and possibly legal backup.
Insurance: Don’t Skip Wind, Fire & Liability Coverage
Arizona’s climate and geography present unique risks:
- High heat and sun exposure
- Windstorms
- Rural wildfire risk (in certain areas)
Make sure your policy covers:
- Dwelling and liability
- Loss of rental income if the property becomes uninhabitable
- Natural disaster coverage (as needed)
Compare quotes from multiple carriers, and ask about:
Umbrella liability policies
Replacement cost coverage
Flood insurance (depending on the floodplain)
Accounting and Bookkeeping: Keep It Clean
Distance makes accounting harder, not impossible. Solid bookkeeping helps you:
- Track income and expenses
- Maximize tax deductions
- Report accurately to the IRS and Arizona
- Prepare for refinancing or selling
Software like QuickBooks, Stessa, or Buildium can help. If you have multiple properties, consider:
- Hiring a local accountant
- Outsourcing to a property accounting firm
Good records protect you during audits and make tax time easier.
Expect Some Travel—but Not Always Full Walkthroughs
Many out-of-state investors buy without doing an in-person walkthrough, relying on:
- Virtual tours
- Local agents
- Third-party inspectors
Still, planning at least one trip—before or after purchase—can give you:
- A feel for neighborhoods
- Better networks with service providers
- Personal insights that photos can’t capture
You don’t have to live in Arizona to invest well—but showing up occasionally pays dividends.
Exit Strategy: Know How & When You’ll Sell
Too many investors focus on purchase and forget the exit.
Your exit strategy might include:
- Selling at a profit
- 1031 exchange into another property (deferring capital gains taxes)
- Refinancing for cash-out equity
Arizona’s market cycles will affect timing. Talk with your agent and accountant about:
- Local appreciation trends
- Tax implications of selling from out of state
- How long you realistically plan to hold the property
The Bottom Line: Distance Is a Challenge But Not a Barrier
Investing in Arizona real estate while living out of state comes with hurdles—but none are insurmountable with the right strategy and team.
Here’s what you absolutely must lock in before you buy:
✔ Thorough market research
✔ Local agent and property manager you trust
✔ Clear understanding of taxes and legal requirements
✔ Financing lined up
✔ Budget for contingencies
✔ Exit strategy
With these in place, Arizona can be a rewarding market for long-term investors looking to diversify beyond their home state.
Investing in Phoenix real estate when you live out of state can be challenging. However, with the right information and assistance, it can be a smart decision to build long-term wealth and generate passive income. By following the ten things buyers should look for and working with a professional real estate buyer at The Land Exchange, you can make informed decisions and achieve your investment goals. Contact us today to learn more about how we can assist you in your investment journey. (623) 257-6009