Location: Washington-Arlington-Alexandria, DC | Metro: Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,240 |
| 1 Bedroom | $2,340 |
| 2 Bedrooms | $2,590 |
| 3 Bedrooms | $3,300 |
| 4 Bedrooms | $3,890 |
| 5 Bedrooms | $4,512 |
| 6 Bedrooms | $5,053 |
| 7 Bedrooms | $5,457 |
| 8 Bedrooms | $5,730 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 20860 provides a clear snapshot of the potential returns for landlords and small-portfolio investors. Using the annualized Fair Market Rent (FMR) for a 2-bedroom property at $2300, the implied gross yield can be calculated as follows:
First, consider the FMR scenario. The annual rent revenue would be $2300. To determine the gross yield, divide this amount by the median home value of $821,786. This yields an implied gross yield of approximately 0.28%. This figure represents the percentage of the property's value that is returned annually in rental income under the FMR rate.
Next, examine the market rent scenario. With a market rent of $1,405 per month, the annual rent revenue would be $16,860. Dividing this by the median home value gives an implied gross yield of around 2.05%. This calculation shows the percentage of the property's value that is returned annually based on the actual market rates.
The stark difference between these two gross yields highlights the financial implications of participating in the Section 8 program versus renting at market rates. The FMR rate offers a significantly lower gross yield, which might not be attractive for many investors looking to maximize their returns. Conversely, the market rent scenario provides a much higher gross yield, aligning more closely with traditional investment expectations.
Given the 12.8% renter density in ZIP 20860, it is important to note that the demand for rental properties, including those in the Section 8 program, is relatively low compared to other areas. However, the exact days-on-market (DOM) data is not available, which could provide further insight into how quickly properties are rented out under either scenario. Despite this, the higher gross yield associated with market rents suggests a more realistic and potentially profitable scenario for most landlords and small-portfolio investors.
In conclusion, while the Section 8 program offers stability and a guaranteed tenant, the financial return is considerably lower than what can be achieved through market rents. Investors should weigh the benefits of each option carefully, considering both the gross yield and the overall demand for rental housing in ZIP 20860.
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.