Location: Montgomery, AL | Metro: Montgomery, AL MSA
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $960 |
| 1 Bedroom | $980 |
| 2 Bedrooms | $1,120 |
| 3 Bedrooms | $1,440 |
| 4 Bedrooms | $1,660 |
| 5 Bedrooms | $1,926 |
| 6 Bedrooms | $2,157 |
| 7 Bedrooms | $2,330 |
| 8 Bedrooms | $2,447 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,120 | $134,062 | 0.84% | C |
| 3BR | $1,440 | $216,570 | 0.66% | D |
| 4BR | $1,660 | $300,073 | 0.55% | F |
| 5BR | $1,926 | $439,748 | 0.44% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate scenario for ZIP code 36067, located in Prattville, Alabama, can be analyzed using the Fair Market Rent (FMR) and the Zillow Observed Rental Index (ZORI). For a two-bedroom property, the annualized FMR is $1140 per month, while the ZORI indicates a market rent of $1,766 per month.
To calculate the gross yield, we use the median home value of $235,168. The annual rent at the FMR would be $13,680, leading to a gross yield of approximately 5.82%. In contrast, the annual market rent based on ZORI would amount to $21,192, resulting in a gross yield of around 8.97%.
Given the 23.0% renter density and a 17-day days-on-market (DOM), the market rent scenario appears more realistic. A lower DOM suggests that properties are rented quickly, indicating strong demand in the area. However, it's important to note that the Section 8 program typically caps rental amounts at or below the FMR, making the higher market rent less likely to be achieved through the program.
The gross yield derived from the FMR is more aligned with the reality of Section 8 participation, as landlords are limited by the government-set rates. While the higher gross yield from market rents is attractive, the specifics of the Section 8 program mean that landlords must factor in the limitations imposed by the FMR when assessing potential returns.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.