Section 8 Fair Market Rent (FMR) for ZIP 38125 - 2027

Investment Score for ZIP 38125

Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)

FY 2027 Fair Market Rent Rates

Unit Size	Monthly FMR
Studio	$1,340
1 Bedroom	$1,460
2 Bedrooms	$1,590
3 Bedrooms	$2,100
4 Bedrooms	$2,420
5 Bedrooms	$2,807
6 Bedrooms	$3,144
7 Bedrooms	$3,396
8 Bedrooms	$3,566

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
2BR	$1,590	$160,236	0.99%	C
3BR	$2,100	$250,735	0.84%	C
4BR	$2,420	$309,649	0.78%	D
5BR	$2,807	$372,690	0.75%	D

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 38125, Shelby County, Tennessee #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 38125 is set by HUD for 2026. The FMRs are as follows: - 0BR: $1290 - 1BR: $1400 - 2BR: $1550 (which represents 21.6% of the median household income) - 3BR: $2050 - 4BR: $2380 These figures represent the maximum amount that a Section 8 voucher holder can pay towards rent. However, the actual rents in the area must be compared to these FMRs to understand the dynamics. For instance, the Zillow median price for a 2BR unit is $161,651, which translates into rental rates that are significantly higher than the FMRs. The price-to-FMR ratio for a 2BR unit is 8.7x, indicating that the average market rent is approximately $13,492 annually ($1,124 per month), which is much higher than the FMR of $1550. This means that voucher holders face significant constraints in finding suitable housing within their budget. They would need to find units priced below the FMR, which could be challenging given the high market rents. Additionally, landlords may be hesitant to accept vouchers due to the disparity between the market rent and the FMR, potentially leading to a shortage of available units for voucher holders. #### Affordability & Renter Profile ZIP code 38125 has a population of 43,071, with 46.5% of residents being renters. This indicates a substantial rental market. The occupancy rate stands at 95.0%, suggesting that the housing stock is nearly fully utilized, which implies a tight market condition. Given the median household income of $86,162, the affordability of housing is a critical issue for many residents, especially those who rely on Section 8 vouchers. For voucher holders, the 2BR FMR of $1550 is only 21.6% of the median household income, making it relatively affordable compared to overall income levels. However, the challenge lies in finding units that are willing to accept vouchers and are priced at or below the FMR. The high price-to-FMR ratio suggests that there is a significant gap between what voucher holders can afford and what the market demands, creating a competitive environment for renters. #### Investor Angle From an investor's perspective, the key question is whether properties can generate positive cash flow at the FMR levels. Given the Zillow median price of $161,651 for a 2BR unit, the potential rental income based on the FMR is $1550 per month. To determine if this is cash-flow positive, we need to consider the costs associated with owning and managing a property. Assuming a typical mortgage payment, property taxes, insurance, maintenance, and other expenses, the total cost of ownership for a 2BR unit might be around $1,000 to $1,200 per month. At an FMR of $1550, the net cash flow would be positive, ranging from $350 to $550 per month. However, this assumes that the property can be rented out at the FMR, which may not always be possible due to the high market rents. The investment grade of the ZIP code can be assessed by considering the demand for rental properties and the likelihood of finding tenants willing to pay the FMR. With a high occupancy rate and a significant portion of the population being renters, there is strong demand. However, the challenge remains in attracting tenants who can pay the FMR, particularly in a market where rents are significantly higher. #### Specific Actionable Insights 1. **Target Properties Below FMR**: Investors should focus on acquiring properties that can be rented out at or slightly below the FMR. For example, a 2BR unit priced at $1,400 per month would be more attractive to voucher holders and likely easier to lease. This strategy leverages the existing demand while ensuring compliance with HUD guidelines. 2. **Consider Multi-Family Units**: Given the higher FMRs for larger units, multi-family properties such as duplexes or small apartment buildings might offer better opportunities. A 3BR unit with an FMR of $2050 would provide a higher rental income, potentially improving cash flow even when factoring in increased management and maintenance costs. 3. **Engage with Local Landlords**: Networking with local landlords can provide insights into the challenges and opportunities of accepting Section 8 vouchers. Understanding their concerns and addressing them through efficient property management and marketing can increase the likelihood of successful tenancies. #### Bottom Line For Section 8-focused investors, ZIP code 38125 presents a mixed picture. While the high occupancy rate and significant rental population suggest strong demand, the high market rents and price-to-FMR ratio indicate a challenging environment for finding properties that can be rented out at the FMR. Given these factors, the recommendation is to **Hold** investments in this ZIP code. The market conditions are tight, and finding properties that can be rented out at the FMR will require careful selection and possibly some negotiation with local landlords. Investors should proceed cautiously, focusing on properties that are well-positioned to attract voucher holders and manage the financial constraints effectively. In summary, while there is potential for positive cash flow, the high market rents and limited availability of units priced at the FMR make this ZIP code a challenging but viable option for Section 8-focused investors.

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.