Location: Huntsville, AL | Metro: Huntsville, AL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,140 |
| 1 Bedroom | $1,200 |
| 2 Bedrooms | $1,370 |
| 3 Bedrooms | $1,770 |
| 4 Bedrooms | $2,290 |
| 5 Bedrooms | $2,656 |
| 6 Bedrooms | $2,975 |
| 7 Bedrooms | $3,213 |
| 8 Bedrooms | $3,374 |
The analysis of the Section 8 cap-rate picture for ZIP code 35762 in Alabama reveals several key points that are crucial for landlords and small-portfolio investors.
Firstly, the Fair Market Rent (FMR) for a two-bedroom apartment in ZIP 35762 for fiscal year 2024 is set at $1280 per month. This figure annualizes to $15,360. Given the lack of specific market rent data, we cannot directly compare this to the prevailing rental rates in the area. However, the absence of a defined market rent suggests that there might be limited data or that the rental market is highly variable or influenced by other factors such as government assistance programs.
The median home value for ZIP 35762 is also not available, making it difficult to calculate a precise cap rate. The cap rate is a ratio that measures the net operating income against the property's value, indicating the potential return on investment. Without the median home value, we cannot provide an exact cap rate, but we can discuss the implications of the FMR and market rent on the gross yield.
The implied gross yield based on the FMR would be calculated by dividing the annualized FMR by the median home value. Since the median home value is not specified, let's assume a hypothetical median home value for illustration purposes. If the median home value were hypothetically $150,000, the gross yield using the FMR would be approximately 10.24%. This calculation assumes that the property can be rented out at the FMR level without any vacancy or expense considerations, which is rarely the case in reality.
Given the lack of data on renter density and days on market (DOM), it is challenging to determine which scenario is more realistic. However, if we consider that the FMR represents a guaranteed income stream for landlords participating in the Section 8 program, the implied gross yield based on the FMR could be seen as a conservative estimate of potential returns.
In conclusion, while the exact cap rate cannot be determined due to missing data, the annualized FMR provides a baseline for gross yield calculations. For a hypothetical median home value of $150,000, the gross yield would be 10.24%, offering a starting point for investors. However, the actual performance will depend on the specific conditions of the local real estate market and the terms of participation in the Section 8 program.
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.