Location: Pittsfield, MA | Metro: Pittsfield, MA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,340 |
| 1 Bedroom | $1,350 |
| 2 Bedrooms | $1,740 |
| 3 Bedrooms | $2,280 |
| 4 Bedrooms | $2,910 |
| 5 Bedrooms | $3,376 |
| 6 Bedrooms | $3,781 |
| 7 Bedrooms | $4,083 |
| 8 Bedrooms | $4,287 |
The analysis for ZIP code 01227 in Massachusetts reveals some critical insights into the potential for Section 8 properties in this area. To derive the cap-rate picture, we must first understand the financial mechanics at play. The Fair Market Rent (FMR) for a two-bedroom apartment in ZIP 01227 for fiscal year 2024 is set at $1410 per month. This figure annualizes to $16,920 per year. While the exact median home value is not available, it's important to consider that the implied gross yield from the Section 8 rental rate can be compared to typical yields from market rents.
In an ideal scenario where the market rent matches the FMR, the annualized rental income would still be $16,920. However, market rents are currently not available for ZIP 01227, making it challenging to provide a direct comparison. Despite this, the implied gross yield from Section 8 can be estimated based on the annual rental income relative to the property value. For instance, if we hypothetically assume a median home value of $300,000, the gross yield from Section 8 would be approximately 5.64%. This is calculated by dividing the annual rental income ($16,920) by the median home value ($300,000).
The lack of data on market rents and median home values makes it difficult to determine a precise cap rate for ZIP 01227. However, the gross yield comparison suggests that Section 8 properties offer a stable, though potentially lower, yield compared to typical market rents. Given the unknown percentage of renter density and the number of days on the market (DOM), it's reasonable to infer that the stability of Section 8 payments might outweigh the risk of vacancy or fluctuating market rents.
Landlords and small-portfolio investors should weigh the guaranteed income from Section 8 against the potential risks and rewards of market-rate rentals. While the gross yield from Section 8 at $1410 monthly rent might be less than what could be achieved through market-rate leases, the security and predictability of the government-backed program can be a significant advantage. The decision ultimately depends on the investor's risk tolerance and investment goals.
Data Sources: FMR data from HUD (2027).
About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.