Location: Cherokee County, AL | Metro: Cherokee County, AL
| Unit Size | Monthly FMR |
|---|---|
| Studio | $740 |
| 1 Bedroom | $740 |
| 2 Bedrooms | $970 |
| 3 Bedrooms | $1,190 |
| 4 Bedrooms | $1,490 |
| 5 Bedrooms | $1,728 |
| 6 Bedrooms | $1,935 |
| 7 Bedrooms | $2,090 |
| 8 Bedrooms | $2,195 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 35973 reveals a challenging investment landscape due to limited market data. Based on the Fair Market Rent (FMR) for a two-bedroom apartment set at $880 annually for fiscal year 2026, the gross yield can be calculated using the median home value of $212,569. This annualized FMR implies a gross yield of approximately 4.14%. The calculation is straightforward: $880 divided by $212,569 equals 0.004136, which converts to about 4.14% when expressed as a percentage.
However, the absence of market rent data makes it difficult to compare the gross yield under normal market conditions. In a scenario where market rent data were available, it would likely exceed the FMR, leading to a higher gross yield. For instance, if the market rent were hypothetically $1,200 per month, this would imply an annual gross income of $14,400. Dividing $14,400 by the median home value of $212,569 yields a gross yield of roughly 6.77%. This comparison highlights that under market conditions, the potential returns could be significantly higher than those based solely on Section 8 rates.
Given the 9.6% renter density in ZIP 35973, it's important to note that the demand for rental properties, particularly those participating in the Section 8 program, might be constrained. A lower renter density suggests fewer potential tenants, which could impact occupancy rates and thus the overall viability of a Section 8 property. Additionally, the lack of data on days on market (DOM) means we cannot assess how quickly properties are rented out, another critical factor for cash flow stability.
In conclusion, while the Section 8 program offers a guaranteed income source, the implied gross yield of 4.14% based on the $880 annual FMR is notably lower than what might be achievable under normal market conditions. Investors should carefully consider the local rental market dynamics, including the relatively low renter density, before committing to a Section 8 investment in ZIP 35973. The decision should also factor in the operational challenges and financial implications of relying on government subsidies versus market rents.
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.