Location: Dothan, AL | Metro: Dothan, AL HUD Metro FMR Area
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 | $730 |
| 1 Bedroom | $740 |
| 2 Bedrooms | $930 |
| 3 Bedrooms | $1,240 |
| 4 Bedrooms | $1,360 |
| 5 Bedrooms | $1,578 |
| 6 Bedrooms | $1,767 |
| 7 Bedrooms | $1,908 |
| 8 Bedrooms | $2,003 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $1,240 | $177,197 | 0.7% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 36321 reveals an interesting contrast between government-subsidized rents and market rates. For a two-bedroom unit, the Fair Market Rent (FMR) set by the government for fiscal year 2024 is $890 per month. At this rate, the annualized rental income would be $10,680. Given the median home value in the area is $187,953, this translates into an implied gross yield of approximately 5.7%.
In contrast, the market rent for a similar unit, based on Census ACS data, stands at $923 per month. This would generate an annual rental income of $11,076. With the same median home value of $187,953, the gross yield under market conditions would be about 5.9%. The difference in yields between the Section 8 scenario and the market scenario is thus marginal, at just over 0.2 percentage points.
Given the 25.4% renter density in ZIP 36321, it's important to consider the local rental market dynamics. A lower renter density might suggest a less competitive rental market, potentially making the Section 8 program more attractive to landlords who can secure a steady tenant stream with minimal vacancy risk. However, the lack of Days on Market (DOM) data complicates the assessment of how quickly properties might rent out under either scenario.
The gross yield under Section 8 conditions, at 5.7%, is slightly lower than the market yield of 5.9%. This gap reflects the trade-off between guaranteed occupancy through the Section 8 program and the potential for higher rental income in a free-market environment. Landlords should weigh these factors carefully, considering the stability of Section 8 payments versus the possibility of achieving higher market rents.
Ultimately, the decision to participate in Section 8 or seek market rents depends on the landlord's risk tolerance and investment goals. For those prioritizing consistent cash flow and reduced management overhead, the Section 8 program offers a reliable option with a known yield. Conversely, landlords willing to navigate the uncertainties of the rental market for potentially higher returns may find the 5.9% gross yield more appealing.
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.