Location: King and Queen County, VA | Metro: Richmond, VA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,300 |
| 1 Bedroom | $1,360 |
| 2 Bedrooms | $1,490 |
| 3 Bedrooms | $1,870 |
| 4 Bedrooms | $2,300 |
| 5 Bedrooms | $2,668 |
| 6 Bedrooms | $2,988 |
| 7 Bedrooms | $3,227 |
| 8 Bedrooms | $3,388 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 23177 provides valuable insights into the potential returns for landlords and small-portfolio investors. To begin with, the Fair Market Rent (FMR) for a two-bedroom apartment in this area for FY 2024 is set at $1210 per month. When annualized, this translates to a yearly rental income of $14,520. Given the median home value in the area is $322,401, the implied gross yield from Section 8 housing would be approximately 4.5%. This is calculated by dividing the annual rental income by the median home value.
In contrast, the market rent for a similar two-bedroom unit stands at $967 per month, based on Census ACS data. Annualizing this figure gives us an annual rental income of $11,604. Using the same median home value, the implied gross yield from market rent would be roughly 3.6%. This calculation is straightforward: annual rental income divided by the median home value.
When comparing these yields, it's clear that the Section 8 scenario offers a higher gross yield, at 4.5%, compared to the market rent scenario, which offers a 3.6% yield. However, the decision between the two should also consider other factors such as the percentage of renters in the area and the days on market (DOM).
The renter density in ZIP 23177 is 20.7%, indicating a relatively low proportion of residents who are likely to seek rental properties. This could suggest that the market rent scenario might be more challenging to achieve due to lower demand for rental units. Additionally, the lack of specific DOM data makes it difficult to assess how quickly properties can be leased, adding another layer of uncertainty to the market rent scenario.
Despite the higher gross yield offered by the Section 8 program, the reality of achieving this yield must be tempered with considerations of the local rental market dynamics. The Section 8 scenario appears more stable and predictable, given the government-backed rental assistance, whereas the market rent scenario, while potentially less lucrative, may face challenges in occupancy rates and lease durations.
In summary, while the Section 8 program offers a higher gross yield of 4.5% compared to the market rent's 3.6%, the decision to participate should balance the stability of government-backed rents against the local market conditions and demand for rental properties.
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.