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 | $870 |
| 1 Bedroom | $880 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,300 |
| 4 Bedrooms | $1,500 |
| 5 Bedrooms | $1,740 |
| 6 Bedrooms | $1,949 |
| 7 Bedrooms | $2,105 |
| 8 Bedrooms | $2,210 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,010 | $48,126 | 2.1% | A+ |
| 3BR | $1,300 | $59,585 | 2.18% | A+ |
| 4BR | $1,500 | $150,772 | 0.99% | C |
U.S. Census Bureau data (2024)
The Section 8 thesis in ZIP code 36105, located in Montgomery, Alabama, centers around the disparity between the Fair Market Rent (FMR) and the actual market rent. For fiscal year 2024, the FMR is set at $1030, while the market rent, as measured by Zillow's Rent Index (ZORI), stands at $1,143. This creates a gap of $113, or approximately 10.97%, between what voucher holders can pay and the open-market rental rates.
In Montgomery, where 39.9% of residents are renters, the median home value is $49,710 and the median household income is $41,486. Given these economic conditions, landlords and small-portfolio investors must consider the implications of renting below market rates to voucher tenants. The FMR being lower than the market rent means that accepting Section 8 vouchers will result in a loss of $113 per month compared to renting to non-voucher tenants.
This financial gap is significant for investors looking to maximize their yields. However, it's important to recognize that the benefits of Section 8 tenancy extend beyond immediate cash flow. Voucher tenants often have a higher level of stability and are less likely to default on rent payments, which can be crucial in an area where many residents are already financially strained. Additionally, the federal government guarantees payment, reducing the risk associated with collecting rent from low-income individuals.
Despite these advantages, the cost of renting to voucher tenants is clear: it represents a direct reduction in potential monthly income. Investors should weigh this against the security of guaranteed income and the lower turnover rates typically associated with Section 8 tenants. In Montgomery, the relatively low median income makes Section 8 vouchers an attractive option for many residents, potentially leading to high demand for properties that accept them.
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.