Location: Cullman County, AL | Metro: Decatur, AL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $870 |
| 1 Bedroom | $900 |
| 2 Bedrooms | $1,110 |
| 3 Bedrooms | $1,460 |
| 4 Bedrooms | $1,790 |
| 5 Bedrooms | $2,076 |
| 6 Bedrooms | $2,325 |
| 7 Bedrooms | $2,511 |
| 8 Bedrooms | $2,637 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate picture for ZIP code 35621 reveals two distinct scenarios based on the Fair Market Rent (FMR) and market rent figures provided. The annualized 2BR FMR for FY 2024 is set at $1180, while the market rent is recorded at $620 according to the Census ACS.
To calculate the gross yield, we divide the annual rent by the median home value. For the FMR scenario, the calculation is as follows: ($1180 * 12) / $213,197 = $14,160 / $213,197 = 0.0664 or 6.64%. This represents the implied gross yield if the property were rented at the FMR rate.
Conversely, using the market rent figure, the calculation would be: ($620 * 12) / $213,197 = $7,440 / $213,197 = 0.0349 or 3.49%. This is the implied gross yield based on the current market rent.
The significant difference between these two gross yields highlights the disparity between government-set rental rates and the actual market conditions. Given the 11.0% renter density in ZIP 35621, it is important to consider that the majority of residents may not qualify for Section 8 housing due to income restrictions and other eligibility criteria.
The lack of data regarding days on market (DOM) suggests that there might be limited information on how quickly properties are leased in this area. However, with the lower renter density, it is more realistic to expect that the market rent of $620 would be more commonly achieved. The higher FMR rate of $1180 could only be realized if the landlord participates in the Section 8 program, which comes with its own set of regulatory requirements and potential delays in lease-up times.
In summary, while the Section 8 FMR provides a gross yield of 6.64%, the more likely scenario for landlords and small-portfolio investors is the market rent yield of 3.49%. Investors should weigh the benefits of higher rental income against the potential drawbacks of participating in the Section 8 program, including compliance costs and administrative burdens.
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.