Location: Mobile, AL | Metro: Mobile, 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 | $860 |
| 1 Bedroom | $900 |
| 2 Bedrooms | $1,050 |
| 3 Bedrooms | $1,360 |
| 4 Bedrooms | $1,440 |
| 5 Bedrooms | $1,670 |
| 6 Bedrooms | $1,870 |
| 7 Bedrooms | $2,020 |
| 8 Bedrooms | $2,121 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,050 | $124,515 | 0.84% | C |
| 3BR | $1,360 | $157,196 | 0.87% | C |
| 4BR | $1,440 | $210,249 | 0.68% | D |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 36606 in Mobile, Alabama, provides valuable insights into potential investment returns. Based on the Fair Market Rent (FMR) for a 2-bedroom apartment at $1080 annually and the Zillow Observed Rent Index (ZORI) at $1,257 per month, we can derive two distinct gross yield scenarios.
First, using the annualized FMR of $1080, the implied gross yield is calculated as follows:
Second, applying the ZORI monthly rent of $1,257, the annualized figure is $15,084, leading to an implied gross yield of:
Given that 51.3% of residents in ZIP 36606 are renters, and the Days on Market (DOM) is 36 days, the ZORI-based gross yield scenario is more realistic. The higher renter density suggests a strong demand for rental properties, and the relatively low DOM indicates that properties are occupied quickly, reducing vacancy rates. Therefore, the market rent of $1,257 per month, resulting in a gross yield of 10.84%, reflects the true earning potential for landlords and small-portfolio investors in this area.
The FMR-based gross yield of 0.78% is significantly lower and likely represents a worst-case scenario for landlords participating in the Section 8 program. It's important to note that while the FMR provides a baseline for government-subsidized rents, market conditions often allow for higher rental income, especially when considering the high proportion of renters and quick property turnover in ZIP 36606.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.