Location: Decatur, AL | Metro: Decatur, AL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $840 |
| 1 Bedroom | $850 |
| 2 Bedrooms | $1,040 |
| 3 Bedrooms | $1,340 |
| 4 Bedrooms | $1,710 |
| 5 Bedrooms | $1,984 |
| 6 Bedrooms | $2,222 |
| 7 Bedrooms | $2,400 |
| 8 Bedrooms | $2,520 |
The analysis for ZIP code 35602 in Alabama focuses on deriving the Section 8 cap-rate picture based on available data. The Fair Market Rent (FMR) for a two-bedroom apartment in fiscal year 2024 is set at $950 annually. However, the market rent data is currently unavailable, as is the median home value for the area. This lack of comprehensive data presents challenges in providing a precise cap-rate scenario.
To calculate the implied gross yield, we need to consider the rental income against the property value. Given the FMR of $950 for a two-bedroom apartment, the annualized rental income can be calculated. However, without the median home value, it's impossible to derive an exact cap rate. A cap rate is typically calculated as the net operating income (NOI) divided by the property value, but since the market rent and median home value are not specified, we cannot provide a definitive gross yield.
Despite these limitations, we can still make some observations about the potential attractiveness of Section 8 properties in ZIP 35602. The guaranteed rent through the Section 8 program provides a stable income source for landlords, especially in areas where the housing market might be volatile. However, the implied gross yield based on the FMR alone would be lower compared to what could potentially be achieved with market rents, if they were higher than the FMR.
The renter density and days on market (DOM) data are also unspecified, which means we cannot accurately assess the competition for tenants or the speed at which properties are leased. These factors play a crucial role in determining whether Section 8 properties are a better investment option compared to market-rate rentals. High renter density could indicate a robust demand for rental properties, which might favor Section 8 properties due to their stability. Conversely, if the DOM is high, it could suggest that properties take longer to lease, which might affect the overall yield.
In conclusion, while the specific gross yield cannot be definitively stated due to missing data, the stability of Section 8 rents offers a reliable income stream. Landlords and investors should consider the broader context of the local real estate market, including the competition for tenants and the typical leasing period, before making investment decisions. The comparison between Section 8 and market-rate yields remains inconclusive without additional data points.
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.