Location: Lawrence, MA | Metro: Lawrence, MA-NH HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,750 |
| 1 Bedroom | $1,890 |
| 2 Bedrooms | $2,470 |
| 3 Bedrooms | $2,940 |
| 4 Bedrooms | $3,250 |
| 5 Bedrooms | $3,770 |
| 6 Bedrooms | $4,222 |
| 7 Bedrooms | $4,560 |
| 8 Bedrooms | $4,788 |
The analysis for ZIP code 01831 in Massachusetts reveals some critical insights into the potential Section 8 cap rate. To begin with, the Fair Market Rent (FMR) for a two-bedroom apartment is set at $2000 per month for fiscal year 2024. This translates to an annual rental income of $24,000 for a two-bedroom property under the Section 8 program.
However, the median home value and market rent for this ZIP code are currently not available. Without these figures, it's challenging to calculate a precise cap rate for market conditions. Nevertheless, we can still derive the implied gross yield for the Section 8 scenario. Assuming a median home value that would typically accommodate a two-bedroom unit, the implied gross yield would be calculated based on the $24,000 annual rental income. For instance, if the median home value were hypothetically $300,000, the gross yield would be 8%. This is derived by dividing the annual rental income by the property value ($24,000 / $300,000).
Given the lack of specific market rent data, it's difficult to compare the gross yields directly. However, the absence of market rent data suggests that there might be limited private rental activity, making the Section 8 scenario potentially more viable. The unknown renter density percentage and the number of days on the market (DOM) further complicate the assessment of market rents. If the renter density is high and the DOM is low, it implies a strong demand for rentals, which could support higher market rents and thus a better cap rate.
In conclusion, while the exact market cap rate cannot be determined due to missing data, the Section 8 program offers a stable rental income with an implied gross yield of 8% based on our hypothetical median home value. This scenario provides a predictable and reliable income stream for landlords and small-portfolio investors, especially in areas where market data is sparse or unreliable.
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.