Location: Montgomery, AL | Metro: Montgomery, AL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $980 |
| 1 Bedroom | $990 |
| 2 Bedrooms | $1,140 |
| 3 Bedrooms | $1,460 |
| 4 Bedrooms | $1,690 |
| 5 Bedrooms | $1,960 |
| 6 Bedrooms | $2,195 |
| 7 Bedrooms | $2,371 |
| 8 Bedrooms | $2,490 |
The analysis for ZIP code 36131 in Alabama focuses on the potential returns for landlords and small-portfolio investors through the lens of Section 8 housing. With an annualized Fair Market Rent (FMR) for a 2-bedroom unit set at $1080 for fiscal year 2024, the first scenario to consider is the rental income under the Section 8 program.
In the context of Section 8, the gross yield can be derived from the annual rental income. Given that the 2BR FMR is $1080, this represents the total annual rental income per unit under the program. However, without a specific median home value for ZIP 36131, we cannot calculate a precise cap rate. The cap rate formula is Net Operating Income (NOI) divided by Property Value. Since the NOI is essentially the rental income minus expenses, and the property value is not available, we can only state the gross yield as $1080 per unit annually.
Moving to the second scenario, where the market rent is not available, it's important to note that the gross yield would be higher if the market rent were above the Section 8 FMR. This is because the gross yield is directly tied to the rental income generated. In absence of specific market rent figures, it's challenging to provide a comparative gross yield. However, generally speaking, market rents tend to exceed the FMRs set by the government, suggesting a potentially higher gross yield in the open market.
The lack of specific data regarding the median home value, renter density, and days on market (DOM) complicates a detailed analysis. Typically, a higher renter density and shorter DOM indicate a robust rental market, which could support higher market rents. However, without these figures, it's impossible to determine the exact gross yield or cap rate for market rents in ZIP 36131.
Given the available data, the Section 8 scenario provides a concrete gross yield of $1080 annually per 2BR unit. While the market rent scenario likely offers a better gross yield, it remains speculative due to the unavailability of key metrics such as median home value and precise market rent figures. Investors should conduct further research to refine their investment decisions.
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.