Location: Palm Bay-Melbourne-Titusville, FL | Metro: Palm Bay-Melbourne-Titusville, FL MSA
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 | $1,570 |
| 1 Bedroom | $1,810 |
| 2 Bedrooms | $2,110 |
| 3 Bedrooms | $2,820 |
| 4 Bedrooms | $3,210 |
| 5 Bedrooms | $3,724 |
| 6 Bedrooms | $4,171 |
| 7 Bedrooms | $4,505 |
| 8 Bedrooms | $4,730 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $2,110 | $195,893 | 1.08% | B |
| 3BR | $2,820 | $353,896 | 0.8% | D |
| 4BR | $3,210 | $440,549 | 0.73% | D |
| 5BR | $3,724 | $553,200 | 0.67% | D |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 32904 in Melbourne, FL, reveals an interesting dynamic between government-subsidized rental income and market rents. For a two-bedroom unit, the Fair Market Rent (FMR) for FY 2024 stands at $1760 annually, while the Zillow Observed Rent Index (ZORI) indicates a market rent of $1,966 per month. Given the median home value in the area is $377,181, we can calculate the implied gross yields for both scenarios.
First, let's consider the FMR scenario. With an annual rent of $1760, the implied gross yield is approximately 0.47%. This calculation is based on the annual rent divided by the median home value: ($1760 / $377,181) * 100 = 0.47%. On the other hand, if we use the ZORI figure, the annual market rent comes out to be $23,592, resulting in an implied gross yield of about 6.26%. The formula here is ($23,592 / $377,181) * 100 = 6.26%.
The stark difference between these two yields makes it necessary to evaluate which scenario is more plausible. In ZIP 32904, where 25.6% of residents are renters, and the Days on Market (DOM) for properties is 44 days, the market rent scenario appears more realistic. A DOM of just 44 days suggests that homes are selling quickly, indicating strong demand and likely supporting higher rental prices. Moreover, the renter density, though not exceptionally high, still points towards a competitive rental market that would favor the higher market rent over the lower FMR.
In conclusion, the implied gross yield for a Section 8 property in ZIP 32904 is significantly lower compared to the yield from market rents. Landlords and small-portfolio investors should consider the local rental market dynamics, including the relatively low renter density and quick sales pace, when deciding whether to participate in the Section 8 program or aim for market rents. The 6.26% gross yield from market rents is more in line with the observed rental trends in the area.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.