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 35293 in Alabama reveals incomplete data, which limits our ability to provide a precise picture of the Section 8 cap rate. However, we can still draw some conclusions based on the available information.
The Fair Market Rent (FMR) for a two-bedroom apartment in ZIP 35293 for fiscal year 2024 is set at $1240 per month. Annualizing this figure yields a gross annual rental income of $14,880. Without a specific median home value, it's challenging to calculate an exact cap rate, but we can infer that the gross yield would be relatively low if we consider typical home values in similar areas. For instance, if we assume a median home value of around $150,000, the implied gross yield would be approximately 9.92%. This is calculated by dividing the annual rental income ($14,880) by the property value ($150,000).
Regarding the market rent, the data is currently unavailable, making it impossible to compare the Section 8 rental rates against the prevailing market rates. In such a scenario, the gross yield would be even lower if the median home value were higher, which is common in many parts of Alabama.
The lack of specific renter density and days on market (DOM) figures further complicates a detailed analysis. However, it's important to note that the absence of these metrics does not necessarily indicate poor performance; it simply means that we cannot quantify the impact on the cap rate or gross yield accurately.
In conclusion, while the Section 8 program provides a guaranteed income source, the implied gross yield of around 9.92%, based on an assumed median home value, is quite low compared to what might be expected from market rents in a fully informed scenario. Given the incomplete data, the most realistic assessment is that the actual gross yield could be significantly influenced by the median home value and other local market factors. Investors should use this rough estimate as a starting point for their own calculations and due diligence.
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.