Location: Lamar County, AL | Metro: Tuscaloosa, AL HUD Metro FMR Area
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 | $870 |
| 1 Bedroom | $880 |
| 2 Bedrooms | $1,060 |
| 3 Bedrooms | $1,350 |
| 4 Bedrooms | $1,400 |
| 5 Bedrooms | $1,624 |
| 6 Bedrooms | $1,819 |
| 7 Bedrooms | $1,965 |
| 8 Bedrooms | $2,063 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,350 | $171,727 | 0.79% | D |
U.S. Census Bureau data (2024)
The analysis for ZIP code 35555 reveals a distinct picture when comparing the potential gross yields for properties under Section 8 versus the broader rental market. For a two-bedroom property, the Fair Market Rent (FMR) set by Section 8 for fiscal year 2024 is $920 per month. This translates into an annual rent of $11,040. Given the median home value in the area is $139,273, the implied gross yield for a Section 8 property would be approximately 8.0%. This is calculated by dividing the annual rent ($11,040) by the median home value ($139,273).
In contrast, the market rent for a similar two-bedroom property is reported at $683 per month based on Census ACS data. This results in an annual rent of $8,196. Using the same median home value, the implied gross yield for a property rented at market rates is approximately 5.9%. This calculation is derived by dividing the annual market rent ($8,196) by the median home value ($139,273).
The higher gross yield under Section 8 suggests that it might be a more attractive option for landlords and small-portfolio investors looking to maximize their returns. However, the decision should also consider the renter density and the days-on-market (DOM) statistics. With a renter density of 26.9%, there is a significant portion of the population leasing homes, which could indicate a competitive rental market.
Despite the lack of specific DOM data, the higher gross yield from Section 8 can be seen as more stable and predictable due to government backing, compared to the volatility often found in the private rental market. The stability offered by Section 8 can offset the slightly lower demand from renters, making it a safer bet for steady income generation.
Therefore, for ZIP 35555, a Section 8 property with a gross yield of 8.0% is more realistic and beneficial for investors, considering the predictability of rent payments and the government's role in ensuring timely payment. This scenario provides a better risk-adjusted return than the market rent scenario with a gross yield of 5.9%, especially in light of the moderate renter density and the inherent risks associated with variable market conditions.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.