In 2004, a San Francisco investor bought a duplex in Arizona City, Arizona, for $98,000. It was a foreclosure. He sold it a year later (2005) for $165,000. Comparable properties are presently worth around $50,000; although prices seem to be moving up again. Obviously, the housing bubble and burst played a major role; however, Arizona City has some natural volatility due to the profile of buyers that are writing contracts and buying properties. The combination of a lot of investors and a lot of barely-qualified borrowers tends to magnify the number of foreclosures in Arizona City.
First, the investor side:
At any given time, Arizona City tends to have the least expensive real estate in the Phoenix area (although its possibly a stretch to call it that as you are over an hour from downtown and closer to the northern fringes of Tucson). This naturally attracts a lot of real estate investors whose inclination is to spend as little as possible in buying a rental property; multi-family provides them more rent relative to every dollar of sale price (fully rented, both sides combined tend to generate more income than a single family home of the same purchase price). Relative to its small population of around 10,000, there are hundreds of small multi-family properties (2-4 units) in Arizona City. The zoning mix is unmatched anywhere in Phoenix. There is probably too much multi-family relative to the size of the city, and if you talk to property managers, ask them what their vacancy rates are. If it is something like 25%, that is probably a good indication that there are more rentals than renters.
Arizona City also attracts people who drive until they qualify and thus are on the lower end of the income scale. This phenomenon is magnified with duplexes because owner-occupants can use the income from the other side of the duplex to help them qualify. There is a large population of retirees whose income may be safe (social security, pensions, etc.) However, for those just getting by, buying everything you can possibly afford does not leave you a lot of room for an emergency fund if you get laid off or need to replace a $4000 A/C unit.
Is Arizona City a good place to invest?
This is not something you can answer yes or no. It is going to depend on what your needs are, how you speculate market values and rents will move in the future, and your long-term view of Arizona City. For the investor who bought a duplex in 2004, it was one of the best investment decisions he ever made. Since he put down around 5% and had the property breaking even or positive cash flow for the year he held it, his investment return was something like 1000%. For many people who overpaid for units and tried to compensate by raising asking rents above market rates, they lost their entire down payment plus much more.
