Location: Newark, NJ | Metro: Newark, NJ HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,540 |
| 1 Bedroom | $1,740 |
| 2 Bedrooms | $2,100 |
| 3 Bedrooms | $2,620 |
| 4 Bedrooms | $3,000 |
| 5 Bedrooms | $3,480 |
| 6 Bedrooms | $3,898 |
| 7 Bedrooms | $4,210 |
| 8 Bedrooms | $4,421 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 07018, East Orange, NJ, reveals a stark contrast between the Federal Market Rent (FMR) and the actual market rent. For a two-bedroom unit, the annualized FMR for FY 2024 is $1740, while the Zillow Observed Rent Index (ZORI) indicates a market rent of $2,102 per month. This difference is significant when considering the median home value in the area, which stands at $463,554.
To calculate the implied gross yield, we first consider the FMR scenario. With an annual rent of $1740, the gross yield is approximately 0.37%. This is calculated by multiplying the monthly rent by 12 months and dividing it by the median home value: ($1740 * 12) / $463,554 = 0.37%. On the other hand, using the market rent of $2,102 per month, the gross yield jumps to about 5.4%. The calculation here is ($2,102 * 12) / $463,554 = 5.4%.
The gross yield based on the market rent is significantly higher than that based on the FMR. Given the high renter density of 72.2%, it is more realistic to assume that the market rent figure is closer to what landlords can expect in East Orange, NJ. However, the N/A-day Days on Market (DOM) suggests there might be challenges in finding tenants quickly, despite the high renter density. Therefore, while the higher gross yield of 5.4% is more reflective of the potential income, investors should be prepared for possible delays in occupancy.
In conclusion, the gross yield derived from the FMR of $1740 is too low to be considered practical for most investors, especially when compared to the market rent of $2,102, which offers a much more attractive 5.4% gross yield. Investors should focus on the market rent figure while being aware of the potential for slower tenant turnover.
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.