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Owning a rental property in Arizona, particularly in Phoenix, can be a lucrative investment given the state’s strong rental demand and population growth. However, landlords often underestimate certain expenses that can erode profits if not properly budgeted. Below are five overlooked costs and tips on how to plan for them.
1. HOA Fees
Many Phoenix neighborhoods, especially in desirable areas like Scottsdale or Peoria, are governed by homeowners’ associations (HOAs). Monthly HOA fees can range from $100 to $500, covering amenities like community pools, landscaping, and security. These fees can increase annually or with special assessments for unexpected repairs (e.g., clubhouse maintenance).
Budgeting Tip: Research HOA fees before purchasing a property. Factor in at least a 5-10% annual increase and check for any pending assessments by reviewing HOA meeting minutes.
2. Desert Landscaping Maintenance
Arizona’s desert climate requires low-water, xeriscape landscaping, but maintaining cacti, gravel, and irrigation systems isn’t free. Professional landscaping services cost $100-$300 per visit, with quarterly or biannual maintenance often necessary to keep properties tenant-ready. Neglecting upkeep can lead to fines from HOAs or reduced tenant appeal.
Budgeting Tip: Allocate $500-$1,500 annually for landscaping and consider drought-tolerant plants to minimize water costs.
3. Pool Maintenance
Pools are common in Phoenix rentals, especially given the warm climate, but they come with significant upkeep. Monthly pool maintenance (cleaning, chemicals, and repairs) averages $100-$200, with additional costs for pump or filter replacements ($500-$2,000 every few years). Unexpected issues like leaks or algae can spike costs.
Budgeting Tip: Budget $1,500-$2,500 annually for routine pool care and set aside a reserve fund for major repairs.
4. Higher Utility Costs in Summer
Arizona’s scorching summers drive up utility costs, particularly for air conditioning. Landlords covering utilities in rental agreements (common in multi-family units) may face bills of $200-$400/month per unit during peak months. Even tenant-paid utilities can lead to disputes if systems are inefficient.
Budgeting Tip: Install energy-efficient HVAC systems and smart thermostats to reduce costs, and clearly outline utility responsibilities in lease agreements.
5. Property Management and Vacancy Costs
Hiring a property manager in Phoenix typically costs 8-12% of monthly rent ($130-$200 for a $1,646/month rental). Vacancies, averaging 31-42 days to lease, can result in lost rent of $1,500-$3,000 per turnover. Unexpected repairs or tenant damage during turnover can further add to costs.
Budgeting Tip: Budget 10% of annual rent for management fees and maintain a vacancy reserve of 1-2 months’ rent. Screen tenants thoroughly to minimize turnover.
Planning for Success
To manage these costs, create a detailed budget that accounts for both fixed (HOA, management) and variable (maintenance, vacancies) expenses. Set aside 10-15% of rental income for ongoing maintenance and an additional 5-10% for emergencies. Regularly review local market trends, as Phoenix’s 7.5% vacancy rate in 2025 offers some tenant negotiation room, but competitive pricing and property condition remain key to minimizing vacancies. By anticipating these overlooked costs, landlords can protect their investment returns in Arizona’s thriving rental market.
