Location: Huntsville, AL | Metro: Florence-Muscle Shoals, AL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $930 |
| 1 Bedroom | $1,030 |
| 2 Bedrooms | $1,180 |
| 3 Bedrooms | $1,530 |
| 4 Bedrooms | $1,900 |
| 5 Bedrooms | $2,204 |
| 6 Bedrooms | $2,468 |
| 7 Bedrooms | $2,665 |
| 8 Bedrooms | $2,798 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 35610 reveals a stark contrast between government-subsidized rental income and market rents. For a two-bedroom property, the Fair Market Rent (FMR) set by the government for fiscal year 2024 is $970 per month. This translates into an annual rental income of $11,640. Given the median home value of $222,076, the implied gross yield for a Section 8 tenant is approximately 5.24%. This figure is calculated by dividing the annual rental income by the median home value.
In contrast, the market rent for a similar property is $1,063 per month, according to the Census ACS data. This equates to an annual rental income of $12,756. The implied gross yield for market rent is thus about 5.75%, computed similarly by dividing the annual rental income by the median home value.
The gross yield for a Section 8 tenant is lower than that for market rent, reflecting the lower monthly rental payments guaranteed by the government. However, the 5.2% renter density suggests that the majority of homes in ZIP 35610 are owner-occupied, making it less likely that many properties will be occupied by Section 8 tenants. Furthermore, the N/A-day Days on Market (DOM) indicates that there's no readily available data on how quickly Section 8 properties are rented out, which could imply either high demand or other complexities in the local housing market.
Given these figures, the gross yield from market rent is higher by 0.51 percentage points compared to Section 8 rent. This difference is significant for investors considering the long-term profitability of a property in ZIP 35610. While Section 8 provides stability and a guaranteed income stream, the lower gross yield means that the property's return on investment will be less than what can be achieved with market rent.
However, the decision should also factor in the local market conditions, including the renter density and the ease of finding Section 8 tenants. Despite the higher gross yield, landlords must weigh the potential challenges of renting to market-rate tenants against the benefits of a stable Section 8 tenancy. The choice ultimately depends on the investor's risk tolerance and financial goals.
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.