Location: Boston-Cambridge-Quincy, MA | Metro: Boston-Cambridge-Quincy, MA-NH HUD Metro FMR Area
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,720 |
| 1 Bedroom | $2,800 |
| 2 Bedrooms | $3,350 |
| 3 Bedrooms | $3,990 |
| 4 Bedrooms | $4,400 |
| 5 Bedrooms | $5,104 |
| 6 Bedrooms | $5,716 |
| 7 Bedrooms | $6,173 |
| 8 Bedrooms | $6,482 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,800 | $453,835 | 0.62% | D |
| 2BR | $3,350 | $632,341 | 0.53% | F |
| 3BR | $3,990 | $917,630 | 0.43% | F |
| 4BR | $4,400 | $1,076,777 | 0.41% | F |
| 5BR | $5,104 | $1,345,533 | 0.38% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 02472, Watertown, MA, reveals a complex rental market dynamic. The Fair Market Rent (FMR) for a 2-bedroom apartment is set at $3,030 annually, while the market rent, as indicated by the Zillow Observed Rent Index (ZORI), stands at $2,919 per month.
To derive the gross yield, we first annualize these figures. For the Section 8 scenario, the annualized FMR is $36,360 ($3,030 x 12 months). Given the median home value of $837,819, the implied gross yield for a Section 8 property would be approximately 4.34%. This calculation is derived by dividing the annualized FMR by the median home value: $36,360 / $837,819 = 0.0434 or 4.34%.
In contrast, the market rent annualizes to $35,028 ($2,919 x 12 months). Using the same median home value, the gross yield for a market-rent property is slightly lower at about 4.18%. The calculation here is $35,028 / $837,819 = 0.0418 or 4.18%.
The difference between the two yields is marginal, with the Section 8 scenario offering a higher gross yield. However, the realistic scenario leans towards the market rent figure due to the high renter density of 52.4% and a relatively quick 8-day Days on Market (DOM). These factors suggest a robust demand for rentals, making it more likely that landlords can achieve market rates rather than relying solely on Section 8 subsidies.
While the Section 8 program provides stability and a guaranteed income source, the slightly higher gross yield must be weighed against the administrative complexities and potential risks associated with the program. The market conditions in Watertown, MA, support a higher likelihood of achieving market rents, thereby offering a more realistic investment scenario for landlords and small-portfolio investors.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). Demographics from U.S. Census (2024).
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.