Location: Washington-Arlington-Alexandria, DC | Metro: Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,970 |
| 1 Bedroom | $3,100 |
| 2 Bedrooms | $3,430 |
| 3 Bedrooms | $4,370 |
| 4 Bedrooms | $5,150 |
| 5 Bedrooms | $5,974 |
| 6 Bedrooms | $6,691 |
| 7 Bedrooms | $7,226 |
| 8 Bedrooms | $7,587 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap rate for ZIP code 20059 reveals some key insights into potential investment opportunities. The Fair Market Rent (FMR) for a two-bedroom apartment in this area for fiscal year 2024 is set at $1980 annually. However, without specific data on the median home value and the current market rent, it's challenging to provide a precise cap rate. For context, let's assume a typical scenario where the median home value is $300,000, and the market rent for a comparable property is $1600 per month.
In the case of Section 8 rental assistance, the annualized rent would be $1980 multiplied by 12 months, equating to $23,760. This figure represents the maximum amount a landlord can charge for a two-bedroom unit under the program. If we take the median home value of $300,000 as a basis for calculating the implied gross yield, the annual rent divided by the home value gives us a yield of approximately 7.92%. This calculation assumes that the property is financed through owner-occupied equity, which is not typically the case for Section 8 properties. In reality, most Section 8 properties are rented out, so the actual gross yield would likely be lower when factoring in financing costs.
Turning to the market rent scenario, if the average market rent for a similar property is $1600 per month, this translates to an annual income of $19,200. Using the same median home value of $300,000, the implied gross yield drops to about 6.4%. This scenario reflects the current rental market conditions and provides a more realistic view of potential returns for small-portfolio investors and landlords who might consider renting outside the Section 8 program.
Given the lack of specific data on renter density and days on market (DOM), it's reasonable to infer that the market rent scenario is more practical for most investors. Section 8 properties offer stability in terms of guaranteed income but come with regulatory compliance and administrative overhead. Meanwhile, market rents reflect the demand and supply dynamics, offering potentially higher yields but also subject to fluctuations based on economic conditions and competition.
To conclude, while the Section 8 program offers a gross yield of around 7.92%, the market rent scenario suggests a more modest but potentially flexible yield of about 6.4%. Investors should weigh these figures against their risk tolerance and investment goals before making any 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.