Location: Philadelphia-Camden-Wilmington, PA | Metro: Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,690 |
| 1 Bedroom | $1,830 |
| 2 Bedrooms | $2,180 |
| 3 Bedrooms | $2,600 |
| 4 Bedrooms | $2,870 |
| 5 Bedrooms | $3,329 |
| 6 Bedrooms | $3,728 |
| 7 Bedrooms | $4,026 |
| 8 Bedrooms | $4,227 |
The analysis of the Section 8 cap rate scenario for ZIP code 19481 in Pennsylvania reveals some interesting insights when compared against the median home value of $791,527. The Fair Market Rent (FMR) for a two-bedroom apartment in this area for fiscal year 2024 is set at $2000 per month. However, the market rent is currently not available, indicating a lack of recent data.
To derive the gross yield, we must first annualize the FMR and compare it to the median home value. Annualizing the FMR for a two-bedroom apartment gives us $24,000 ($2000 x 12 months). This figure represents the potential annual rental income if the property were leased under Section 8 guidelines. When compared to the median home value of $791,527, the implied gross yield for the Section 8 scenario is approximately 3.03%. This calculation is derived by dividing the annualized FMR ($24,000) by the median home value ($791,527).
In contrast, the lack of market rent data means that we cannot provide an accurate comparison for the gross yield in a non-Section 8 scenario. Given the absence of specific renter density and days on market (DOM) data, it's challenging to determine the precise market conditions that would influence the gross yield outside of the Section 8 program.
The 3.03% gross yield under Section 8 is a conservative estimate, reflecting the government-set rental rates. For small-portfolio investors and landlords, this yield should be considered alongside other investment opportunities that might offer higher returns based on market rents. However, the stability and security provided by the Section 8 program can offset the lower yield, making it an attractive option despite the limited gross income relative to the median home value.
Given the incomplete market data, the Section 8 scenario offers a clear, fixed gross yield, while the non-Section 8 scenario remains speculative without additional information on local rental market dynamics. Investors should weigh the guaranteed income stream of Section 8 against the potential volatility and negotiation involved in private rentals.
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.