Location: Washington-Arlington-Alexandria, DC | Metro: Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area
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 | $2,060 |
| 1 Bedroom | $2,150 |
| 2 Bedrooms | $2,380 |
| 3 Bedrooms | $3,030 |
| 4 Bedrooms | $3,570 |
| 5 Bedrooms | $4,141 |
| 6 Bedrooms | $4,638 |
| 7 Bedrooms | $5,009 |
| 8 Bedrooms | $5,259 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,150 | $162,984 | 1.32% | A |
| 2BR | $2,380 | $202,695 | 1.17% | B |
| 3BR | $3,030 | $448,890 | 0.67% | D |
| 4BR | $3,570 | $596,709 | 0.6% | F |
| 5BR | $4,141 | $664,202 | 0.62% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP 20877 in Gaithersburg, MD, reveals two distinct scenarios based on the Fair Market Rent (FMR) and market rent figures. Using the annualized 2BR FMR of $1980 for fiscal year 2024, the implied gross yield for a property in this area would be approximately 0.83%. This calculation is derived by multiplying the monthly FMR by 12 months and dividing that number by the median home value of $481,165.
In contrast, when using the Zillow Observed Rental Index (ZORI) figure of $2,146 per month, the implied gross yield increases to about 0.89%. This is calculated similarly by taking the annualized rental income and dividing it by the median home value.
To determine which scenario is more realistic, we must consider the local rental market conditions. With a renter density of 56.9%, it indicates a significant portion of the population in Gaithersburg, MD, prefers renting over owning. However, the lack of data regarding the days on market (DOM) makes it challenging to predict how quickly properties might turn over or how competitive the rental market is.
The higher gross yield implied by the ZORI figure suggests that landlords might find better returns by renting outside the Section 8 program, where they can potentially charge closer to market rates. The difference between the two yields, while small, could be meaningful when considering the additional administrative burden and restrictions associated with participating in the Section 8 program.
However, the decision ultimately depends on the landlord's investment goals. If the goal is to provide affordable housing while still achieving reasonable returns, the FMR-based yield is more relevant. Conversely, if the goal is to maximize income, the higher ZORI-based yield should be considered. Given the median home value and the current market conditions, the ZORI-based yield appears more aligned with the broader rental market trends.
It's important to note that these figures represent gross yields and do not account for operating expenses, maintenance costs, or other factors that would influence the net operating income (NOI). Landlords and investors should use these gross yields as a starting point for their own detailed financial analyses.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.