📅 Generated May 3, 2026

Rental Property Investment Analysis — Phoenix, AZ

Executive Summary

This single-family residential asset in Phoenix, AZ, represents a strong core-plus investment opportunity. With a 7.88% Cap Rate and positive monthly cash flow of $397 in a high-interest-rate environment, the property demonstrates exceptional yield for the market. We recommend a BUY action based on the property’s ability to outpace inflation and provide a stable 7.44% cash-on-cash return from Day 1.

Key Metrics Dashboard

| Metric | Value | Benchmark (Phoenix SFH) |
| :--- | :--- | :--- |
| Purchase Price | $320,000 | Market Average: $420k - $450k |
| Cap Rate | 7.88% | 5.0% – 6.5% (Strong) |
| Cash-on-Cash Return | 7.44% | 4.0% – 8.0% (Target) |
| Gross Rent Multiplier | 9.5x | 12x – 14x (Lower is better) |
| Monthly Cash Flow | $397 | >$200 per door (Target) |
| Loan-to-Value (LTV) | 80% | Standard Conventional |

Cash Flow Analysis

The property generates a healthy spread between gross income and total debt service. Despite the 7% interest rate, the debt coverage remains robust.

| Category | Monthly | Annual |
| :--- | :--- | :--- |
| Gross Potential Rent | $2,800 | $33,600 |
| Operating Expenses | ($700) | ($8,400) |
| Net Operating Income (NOI) | $2,100 | $25,200 |
| Debt Service (P&I) | ($1,703) | ($20,436) |
| Net Cash Flow | $397 | $4,764 |

Investment Returns

* Cap Rate (7.88%): This is significantly higher than the Phoenix market average for single-family homes, which typically hovers around 5.5%. This suggests either an off-market deal or a property purchased at a high rent-to-value ratio.
* Cash-on-Cash (7.44%): Achieving over 7% CoC with a 7% mortgage interest rate is rare. It indicates that the property is "beating the bank," where the yield on the asset is higher than the cost of the debt.
* GRM (9.5x): A GRM under 10 in a major metro like Phoenix is an indicator of an undervalued asset or a high-demand rental pocket. Most Phoenix assets trade at 12x–15x gross rents.

Market Assessment: Phoenix, AZ

Phoenix continues to be a top-tier growth market due to its diversified economy (semiconductors, healthcare, and finance) and persistent net migration.
* Vacancy Rates: Currently stabilizing around 6–7%. High demand for single-family rentals (SFR) persists as high interest rates price potential buyers out of the market.
* Rent Growth: While the double-digit spikes of 2021 have cooled, Phoenix is projected to maintain a steady 3–4% annual rent growth due to the housing supply deficit.
* Demand Drivers: The "Taiwan Semiconductor" (TSMC) plant and other tech expansions in the North Valley continue to drive high-quality tenant pools into the region.

Risk Factors

1. Interest Rate Environment: At 7%, the cost of capital is high. While the deal pencils out now, a failure to refinance if rates drop could result in "opportunity cost" compared to future lower-interest acquisitions.
2. Maintenance/CAPEX: With monthly expenses estimated at $700 (25% of gross rent), there is a buffer, but older Phoenix homes often face high HVAC replacement costs due to extreme summer heat.
3. Property Tax Reassessments: Arizona’s Proposition 117 limits valuation increases, but a change in ownership can sometimes trigger adjustments that may squeeze margins.
4. Institutional Competition: Phoenix is a favorite for institutional "Buy-to-Rent" funds, which can lead to localized bidding wars and compressed yields in certain sub-markets.

Investment Recommendation: BUY

Reasoning: This is a high-performing asset. Finding a single-family home in Phoenix that yields a 7.88% Cap Rate while utilizing 80% leverage at current rates is an exceptional find. The property offers:
1. Immediate Positive Leverage: The NOI yield (7.88%) is higher than the interest rate (7.0%).
2.

⚠️ AI-generated content. Review before use. Not legal, financial, or professional advice. See AI Disclaimer →

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