Location: Tampa-St. Petersburg-Clearwater, FL | Metro: Tampa-St. Petersburg-Clearwater, FL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,770 |
| 1 Bedroom | $1,830 |
| 2 Bedrooms | $2,130 |
| 3 Bedrooms | $2,720 |
| 4 Bedrooms | $3,310 |
| 5 Bedrooms | $3,840 |
| 6 Bedrooms | $4,301 |
| 7 Bedrooms | $4,645 |
| 8 Bedrooms | $4,877 |
U.S. Census Bureau data (2024)
The Section 8 cap rate scenario for ZIP code 33778 (Largo, FL) can be analyzed using the Fair Market Rent (FMR) and the Zillow Observed Rent Index (ZORI) for a two-bedroom apartment. The annualized FMR for a 2BR unit in ZIP 33778 for FY 2024 is $1800 per month, equating to an annual rental income of $21,600. Meanwhile, the ZORI for a similar unit stands at $2,253 per month, or $27,036 annually.
To derive the gross yield for both scenarios, we use the median home value in Largo, which is $350,636. The gross yield when using the FMR is calculated as follows: $21,600 / $350,636 = 0.0616, or approximately 6.16%. Conversely, the gross yield based on the ZORI is $27,036 / $350,636 = 0.0771, or about 7.71%.
Given the 17.1% renter density and a 34-day Days on Market (DOM), the FMR scenario appears more realistic for investors considering the Section 8 program. A higher DOM suggests that properties may take longer to lease, making the guaranteed rental income from the Section 8 program attractive despite the lower gross yield. Additionally, the renter density indicates that while there is a significant portion of homeowners, there remains a notable demand for rental properties, including those under the Section 8 umbrella.
The difference between the 6.16% gross yield from the FMR and the 7.71% gross yield from the ZORI highlights the trade-off between stability and higher returns. For investors who prioritize a steady stream of income and the security of government-backed leases, the FMR-based yield is a solid benchmark. However, for those willing to navigate the competitive market and potentially face longer vacancy periods, the ZORI-based yield offers a more lucrative opportunity.
In summary, the Section 8 cap rate for ZIP 33778 implies a gross yield of 6.16%, while the market-driven gross yield is 7.71%. Considering the local rental market dynamics, the 6.16% yield from the Section 8 program is a prudent choice for investors seeking stable, predictable cash flows.
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.