Location: Reading, PA | Metro: Reading, PA MSA
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 | $980 |
| 1 Bedroom | $1,120 |
| 2 Bedrooms | $1,420 |
| 3 Bedrooms | $1,750 |
| 4 Bedrooms | $1,880 |
| 5 Bedrooms | $2,181 |
| 6 Bedrooms | $2,443 |
| 7 Bedrooms | $2,638 |
| 8 Bedrooms | $2,770 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,420 | $145,113 | 0.98% | C |
| 3BR | $1,750 | $178,962 | 0.98% | C |
| 4BR | $1,880 | $183,278 | 1.03% | B |
| 5BR | $2,181 | $195,575 | 1.12% | B |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 19601 in Reading, PA, reveals a detailed picture of rental income potential compared to median home values. For a two-bedroom unit, the Fair Market Rent (FMR) set by HUD for fiscal year 2024 is $1170 per month, while the Zillow Observed Rent Index (ZORI) indicates a market rent of $1271 per month. To calculate the gross yield, we annualize these figures.
The annualized FMR for a two-bedroom unit in ZIP 19601 is $14,040 ($1170 x 12 months), and the annualized ZORI is $15,252 ($1271 x 12 months). Given the median home value of $179,712, the implied gross yield based on the FMR is approximately 7.82%. This calculation is derived by dividing the annualized FMR by the median home value: $14,040 / $179,712 = 0.0782 or 7.82%. On the other hand, using the ZORI, the implied gross yield is slightly higher at 8.49%, calculated as $15,252 / $179,712 = 0.0849 or 8.49%.
Evaluating the realism of these yields requires consideration of the local rental market dynamics. With a renter density of 60.5%, there is a substantial demand for rental properties in Reading, PA. However, the lack of data on the days on market (DOM) makes it challenging to assess how quickly properties can be leased at either rate. Despite this limitation, the FMR scenario offers a more conservative estimate, aligning closely with government-set guidelines that aim to ensure affordability. In contrast, the ZORI reflects current market conditions, potentially offering a more optimistic outlook for landlords willing to navigate the complexities of private rentals.
In conclusion, the gross yield for a Section 8 property in ZIP 19601 is estimated at 7.82%, whereas the market rent yield is 8.49%. The FMR provides a safer bet for steady income, guaranteed by the federal government, making it a reliable choice for investors seeking stable returns. Meanwhile, the ZORI suggests a marginally better return, contingent upon the ability to lease units at market rates amidst a competitive landscape. Given the high renter density, the market rate might be achievable, but it's prudent for investors to lean towards the FMR for a guaranteed income stream.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.