Location: Waterbury-Shelton, CT | Metro: Waterbury-Shelton, CT MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,220 |
| 1 Bedroom | $1,310 |
| 2 Bedrooms | $1,710 |
| 3 Bedrooms | $2,140 |
| 4 Bedrooms | $2,550 |
| 5 Bedrooms | $2,958 |
| 6 Bedrooms | $3,313 |
| 7 Bedrooms | $3,578 |
| 8 Bedrooms | $3,757 |
The analysis for ZIP code 06011 in Connecticut reveals a complex picture when considering the Section 8 program's impact on real estate investment. The Fair Market Rent (FMR) for a two-bedroom apartment is set at $1650 annually for fiscal year 2024. However, without specific data on the median home value and market rent, it's challenging to provide a precise cap rate and gross yield.
To derive a rough cap-rate scenario, we must assume that the median home value and market rent can be estimated based on typical values for similar properties. For instance, if we consider the median home value to be around $400,000 and the market rent to be $2000 per month, we can start calculating the gross yields.
In the case of Section 8 participation, with an annualized FMR of $1650 per month, the total annual income would be $19,800. Assuming a median home value of $400,000, the implied gross yield would be approximately 4.95%. This calculation is derived from dividing the annual income ($19,800) by the property value ($400,000).
If we were to use the market rent of $2000 per month instead, the annual income would rise to $24,000. Using the same median home value of $400,000, the gross yield would then be 6%, calculated by dividing $24,000 by $400,000.
The gross yield comparison shows that participating in the market rent scenario offers a higher gross yield than the Section 8 scenario. However, the decision between the two depends largely on the local rental market dynamics, including the percentage of renters and the days on market (DOM).
Given the lack of specific data on renter density and DOM, it's difficult to determine which scenario is more realistic. If the area has a high percentage of renters and quick turnover rates, market rent might be more achievable. Conversely, if the rental market is saturated or there's a significant demand for affordable housing, the Section 8 scenario could be more stable and reliable.
Ultimately, the choice should be informed by local real estate trends and the investor's risk tolerance. While the market rent scenario offers a higher gross yield, the Section 8 program provides a steady stream of income with government backing, making it a safer bet for conservative investors.
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.