Should You Consider Short-Term or Long-Term Rentals in the Phoenix Area?
Phoenix, Arizona has become a hotspot for real estate investors and homeowners alike, especially as demand for both short-term rentals (like Airbnb) and long-term rentals continues to rise. If you're considering investing in rental property in the Phoenix area, it’s important to understand which strategy better fits your goals. The decision between short-term and long-term rentals impacts your income potential, tax planning, time commitment, and overall risk exposure. At Cool Wealth Management, we help business owners and investors align their money with their values—and real estate strategy is a big part of that picture.
Understanding the Phoenix Rental Market
The Phoenix metro area, including Scottsdale, Tempe, and Mesa, has seen massive growth over the last decade. With year-round sunshine, a strong job market, and a growing population, the region remains attractive to both tenants and tourists.
Short-term rentals tend to perform well in high-tourism neighborhoods and during peak events like spring training, golf tournaments, and winter months when snowbirds visit.
Long-term rentals offer more stability and tend to attract working professionals, families, and students attending Arizona State University and other nearby colleges.
Before jumping in, it’s essential to evaluate your investment objectives, time horizon, and level of involvement.
Pros and Cons of Short-Term Rentals
Pros:
Higher income potential: Nightly rates can exceed what you'd get from a monthly lease, especially during peak seasons.
Flexibility: You can block off time to use the property yourself.
Tax deductions: If structured correctly, there may be opportunities to deduct expenses like furnishings, utilities, and cleaning services.
Cons:
More active management: You’ll either need to self-manage or pay a short-term rental manager, which can eat into profits.
Seasonal income: You may experience income volatility during off-peak months.
Regulations: Phoenix and surrounding cities have specific zoning rules and registration requirements for short-term rentals. These can change quickly, so you must stay compliant.
Pros and Cons of Long-Term Rentals
Pros:
Consistent cash flow: Monthly rent is usually reliable and easier to plan around.
Lower turnover costs: With longer leases, you’ll spend less time and money on cleaning, advertising, and screening tenants.
Fewer legal hurdles: Long-term rentals are typically more straightforward from a regulatory standpoint.
Cons:
Limited flexibility: You won’t be able to access the property without coordinating with tenants.
Potential for slower rent growth: While consistent, you may not be able to adjust rent quickly if the market heats up.
Tenant risks: A bad tenant can cause issues that are hard to resolve quickly under Arizona landlord-tenant law.
What’s Right for You?
There’s no one-size-fits-all answer. Here’s how we typically help our clients think through the choice:
If you value time freedom and don’t want to actively manage bookings or guest experiences, a long-term rental might be the better fit.
If you’re looking for higher income and are willing to take on more management or hire help, short-term rentals may generate stronger returns.
If you own multiple properties, it’s possible to diversify—using some for long-term tenants and others for short-term guests.
The Tax Planning Angle
From a tax planning perspective, short-term and long-term rentals are treated differently. Short-term rentals (where the average stay is under 7 days and you provide substantial services) may be considered a business rather than a passive investment. This means they could be subject to self-employment tax—but also offer greater deduction opportunities.
Long-term rentals are typically considered passive income, which can provide tax advantages depending on your income level and other real estate activity. If real estate is a significant part of your portfolio, we’ll want to review how to optimize depreciation, passive activity losses, and 1031 exchanges.
Final Thoughts
At Cool Wealth Management, we help clients take a holistic approach to wealth building. That means considering how real estate fits into your broader financial plan—whether you're growing a business, saving on taxes, or preparing for retirement.
If you’re thinking about investing in Phoenix real estate or you already own rental property and want to review your strategy, schedule a call with us. We’ll help you understand your options, avoid costly mistakes, and make decisions that align with your goals.
