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Cap Rate Analysis: Phoenix, AZ

Investment metrics, interactive calculators, and data-driven analysis for Phoenix rental properties.

Challenging for pure cash flow
Based on $380,000 median price and $1,580/mo median rent
Est. Cap Rate
3.28%
1% Rule
0.42%
Fails
GRM
20.0x
Price / Income
6.1x

Market Data

Median Home Price$380,000
Median Monthly Rent$1,580
Property Tax Rate0.62%
Population1,644,409
Population Growth1.5% / yr
Median Household Income$62,000
Vacancy Rate5.8%
Annual Appreciation2.9%

Cap Rate Calculator — Phoenix

Pre-filled with Phoenix medians. Adjust to match a specific property.

Property Details
$
$
3–8% typical
%
Monthly Expenses
0.62% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
2.78%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$10,576
net operating income
Gross Rent Multiplier
20.0x
High (>15)
1% Rule
0.42%
✗ Fails
Monthly Cash Flow
$881
before debt service
Annual Breakdown
Gross Rental Income$18,960
Less Vacancy−$1,100
Effective Income$17,860
Less Operating Expenses−$7,284
Net Operating Income$10,576

Cash-on-Cash Return — Phoenix

Factor in financing to see your actual return on invested capital in Phoenix.

$
$95,000
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-10.62%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$106,400
$95,000 down + $11,400 closing
Monthly Mortgage
$1,858
on $285K loan
Monthly Cash Flow
$-942
after all expenses
Annual Cash Flow
$-11,304
before taxes
Cash Flow Breakdown
Monthly Rent$1,580
Less Expenses−$664
Less Mortgage−$1,858
Monthly Cash Flow$-942

Is Phoenix a Good Place to Invest in Rental Property?

Phoenix, AZ has a population of 1,644,409 and has been growing at 1.5% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $380,000 paired with median rents of $1,580/mo produces an estimated cap rate of 3.28%.

Property taxes at 0.62% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 5.8% is moderate and within normal parameters for a healthy rental market.

At a price-to-income ratio of 6.1x, homes cost about 6.1 times the local median income of $62,000. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. Home values have appreciated at roughly 2.9% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.

Bottom line: At current median prices, Phoenix is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.

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