Location: Hagerstown, MD | Metro: Hagerstown, MD HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,330 |
| 1 Bedroom | $1,420 |
| 2 Bedrooms | $1,710 |
| 3 Bedrooms | $2,230 |
| 4 Bedrooms | $2,560 |
| 5 Bedrooms | $2,970 |
| 6 Bedrooms | $3,326 |
| 7 Bedrooms | $3,592 |
| 8 Bedrooms | $3,772 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate picture for ZIP code 21779 reveals interesting insights for landlords and small-portfolio investors. Based on the Fair Market Rent (FMR) for a 2-bedroom unit set at $1430 annually for FY 2024, and the market rent of $1,133 per month according to Census ACS data, we can derive two distinct gross-yield scenarios.
First, let's consider the Section 8 scenario. With an annualized FMR of $1430, the monthly rent would be approximately $119.17. Given a median home value of $467,776 in ZIP 21779, the implied gross-yield for a Section 8 property would be about 2.93%. This calculation is derived from the formula: (Annualized Rent / Median Home Value) * 100. The result is $1430 / $467,776 * 100 = 2.93%.
Next, we examine the market rent scenario. At $1,133 per month, the annual market rent would amount to $13,596. Using the same median home value, the implied gross-yield for a market rental property would be significantly higher at approximately 2.91%. This figure is calculated as ($13,596 / $467,776) * 100 = 2.91%.
Given the 33.8% renter density in ZIP 21779, it is evident that there is a substantial portion of the population who are likely to seek rental properties. However, the lack of data on days on market (DOM) makes it challenging to assess the speed at which properties can be leased out. Despite this, the gross-yield comparison between the Section 8 and market rent scenarios is strikingly similar, with only a slight difference of 0.02 percentage points.
In reality, the market rent scenario offers a slightly better gross-yield compared to the Section 8 scenario. However, the decision to participate in Section 8 should not solely be based on yield but also on the stability and predictability of income. Section 8 provides a guaranteed tenant through government subsidies, which can be particularly appealing in a market where the renter density is relatively high at 33.8%, suggesting strong demand for rental properties.
To conclude, while the market rent scenario yields a marginally higher return, the Section 8 program offers a stable income source that can be advantageous in a competitive rental market. Investors should weigh these factors carefully when deciding on their investment strategy in ZIP 21779.
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.