Section 8 Fair Market Rent (FMR) for ZIP 24026 - 2027

FY 2027 Fair Market Rent Rates

The analysis for ZIP code 24026 in Virginia focuses on the implications of the Section 8 program for real estate investments, specifically comparing the Federal Market Rent (FMR) for a two-bedroom apartment to the median home value. The annualized FMR for a two-bedroom rental unit in this ZIP code for fiscal year 2024 is $1040 per month. However, the market rent and median home value data are currently unavailable, which presents a challenge for a precise cap rate calculation.

To derive a rough cap rate picture, we must first understand that the cap rate is calculated as the net operating income (NOI) divided by the property's value. Since the NOI is not provided, we can only focus on the gross yield, which is the annual rental income divided by the property's value. In the case of Section 8 rentals, the gross yield is based on the monthly FMR payments from the government.

In ZIP 24026, the annualized FMR for a two-bedroom unit would be $12,480. Without knowing the median home value, it's impossible to calculate an exact gross yield. However, if we assume a typical scenario where the median home value is around $200,000 (a common figure for many areas), the implied gross yield would be approximately 6.24%. This is calculated by taking the annual FMR ($12,480) and dividing it by the assumed median home value ($200,000).

Given the lack of specific market rent data, we cannot compare this directly to a non-Section 8 scenario. However, it's important to note that the gross yield derived from the FMR does not account for vacancy rates, which can significantly affect the actual yield. Additionally, the renter density and days on market (DOM) are also not available, making it difficult to assess the likelihood of finding tenants for Section 8 properties.

Despite these limitations, the gross yield comparison highlights the potential stability of Section 8 rents compared to market rents. While market rents might offer higher gross yields, they come with the risk of vacancies and fluctuating demand. Section 8 contracts provide a guaranteed income stream, albeit at a lower gross yield, which can be appealing to landlords and small-portfolio investors seeking stable cash flows.

Investors should consider the specific dynamics of ZIP 24026, including local housing market conditions, tenant demand, and the availability of Section 8 vouchers, before making investment decisions. The 6.24% gross yield, based on the FMR, provides a baseline for evaluating the potential returns of Section 8 properties in this area.

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.