Location: Birmingham-Hoover, AL | Metro: Birmingham-Hoover, AL HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,170 |
| 1 Bedroom | $1,260 |
| 2 Bedrooms | $1,370 |
| 3 Bedrooms | $1,720 |
| 4 Bedrooms | $1,930 |
| 5 Bedrooms | $2,239 |
| 6 Bedrooms | $2,508 |
| 7 Bedrooms | $2,709 |
| 8 Bedrooms | $2,844 |
The analysis for ZIP code 35202 in Alabama reveals significant gaps in the data necessary to perform a thorough evaluation of the Section 8 cap rate scenario. However, we can still derive some useful insights based on the available information.
The Fair Market Rent (FMR) for a 2-bedroom apartment in ZIP 35202 for fiscal year 2024 is set at $1240 per month. To annualize this figure, we multiply it by 12, resulting in an annual rental income of $14,880. This is the baseline for calculating the gross yield in a Section 8 scenario.
Unfortunately, the market rent for ZIP 35202 is listed as N/A, which means we cannot compare the Section 8 rent to typical market rates for the area. Additionally, the median home value is also not available, making it impossible to calculate the gross yield for a hypothetical property purchase price. Without these key figures, the exact cap rate cannot be determined.
However, assuming that the median home value were known, the gross yield would be calculated by dividing the annualized FMR by the median home value. For example, if the median home value were $200,000, the gross yield would be 7.44% ($14,880 / $200,000 * 100). If the median home value were higher, say $300,000, the gross yield would drop to 4.96%. These figures highlight how the gross yield varies inversely with the assumed property value.
Given the N/A% renter density and N/A-day days on market (DOM), it's challenging to determine which scenario is more realistic. Typically, a higher renter density might suggest a greater demand for rentals, potentially increasing the likelihood of achieving higher market rents. Conversely, a longer DOM could indicate slower sales, suggesting a lower market value for properties in the area.
In conclusion, while we can calculate the gross yield for a hypothetical median home value, the lack of specific market rent and property value data makes it difficult to provide a precise cap rate. Investors should gather additional local market data to make informed decisions regarding the potential returns of Section 8 properties in ZIP 35202.
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.