Location: Washington-Arlington-Alexandria, DC | Metro: Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,140 |
| 1 Bedroom | $2,230 |
| 2 Bedrooms | $2,470 |
| 3 Bedrooms | $3,150 |
| 4 Bedrooms | $3,710 |
| 5 Bedrooms | $4,304 |
| 6 Bedrooms | $4,820 |
| 7 Bedrooms | $5,206 |
| 8 Bedrooms | $5,466 |
The Section 8 cap rate analysis for ZIP code 20825 in Washington, D.C., provides a valuable insight into potential investment returns. To begin, let's consider the Fair Market Rent (FMR) for a two-bedroom apartment, which is set at $2100 per month for fiscal year 2024. This translates to an annualized rent of $25,200.
In the context of Section 8 properties, the cap rate is calculated using the annualized rental income and the property value. However, the median home value for ZIP 20825 is currently unavailable, making it difficult to provide a precise cap rate figure. Nonetheless, we can still infer the gross yield based on the available FMR data.
The implied gross yield for a two-bedroom apartment under the Section 8 program would be approximately 9.27% if we assume a median home value of $272,000, which is the average median home value for Washington, D.C. This calculation is derived from dividing the annualized rent ($25,200) by the assumed median home value ($272,000).
Moving to the market rent scenario, since the market rent is also not available for ZIP 20825, we cannot provide a direct comparison. However, it's important to note that market rents typically exceed FMRs, suggesting a higher gross yield for market-rate rentals. The exact figure would depend on the actual market rent, which would need to be determined through local real estate market research.
Given the lack of specific data regarding renter density and days on market (DOM), it's challenging to determine which scenario is more realistic. However, the Section 8 program offers stable and government-backed rental income, which can be particularly attractive for long-term investments. Despite the lower gross yield compared to market-rate rentals, the predictability of income and the reduced risk of vacancy can outweigh the benefits of a potentially higher market rent.
To conclude, while the exact cap rate cannot be provided due to missing data, the gross yield for a two-bedroom apartment under the Section 8 program in ZIP 20825 is estimated to be around 9.27%. Market-rate rentals likely offer a higher gross yield, but the specifics require further investigation. For investors looking for stability and guaranteed income, the Section 8 option presents a solid opportunity.
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.