Location: Orleans County, VT | Metro: Orleans County, VT
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,000 |
| 1 Bedroom | $1,040 |
| 2 Bedrooms | $1,280 |
| 3 Bedrooms | $1,650 |
| 4 Bedrooms | $1,790 |
| 5 Bedrooms | $2,076 |
| 6 Bedrooms | $2,325 |
| 7 Bedrooms | $2,511 |
| 8 Bedrooms | $2,637 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate picture for ZIP code 05874 reveals a stark contrast between the federally mandated Fair Market Rent (FMR) and the actual market rent. Using the annualized figures for a two-bedroom property, the FMR set at $1,160 per month translates to an annual rental income of $13,920. In comparison, the Census ACS reported market rent stands at $863 per month, equating to an annual rental income of $10,356.
To derive the implied gross-yield for both scenarios, we divide the respective annual rental incomes by the median home value of $318,471. For the FMR scenario, the gross-yield is calculated as follows:
Given the 7.5% renter density in ZIP 05874, it's important to note that the availability of Section 8 tenants might be limited, affecting the ability to consistently achieve the higher FMR rent. The N/A-day Days on Market (DOM) indicates there is no recent data available regarding how long properties take to lease, which could be due to low turnover rates or other factors.
The FMR gross-yield of 4.37% appears more attractive at first glance, but it's crucial to consider the practical challenges of securing Section 8 tenants. The market rent gross-yield of 3.25%, while lower, represents a more realistic expectation based on current tenant behavior and the limited availability of Section 8 vouchers. Landlords and small-portfolio investors should prepare for the possibility of achieving only the lower market rent, despite the potential for higher FMR-based rents.
In conclusion, while the theoretical cap-rate based on FMR is 4.37%, the actual performance is likely to align closer to the 3.25% indicated by the market rent. This discrepancy highlights the importance of understanding local market conditions and the limitations of government-set rental guidelines when making investment decisions.
Data Sources: FMR data from HUD (2027). 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.