Location: Washington County, KY | Metro: Marion County, KY
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 | $660 |
| 1 Bedroom | $750 |
| 2 Bedrooms | $930 |
| 3 Bedrooms | $1,170 |
| 4 Bedrooms | $1,520 |
| 5 Bedrooms | $1,763 |
| 6 Bedrooms | $1,975 |
| 7 Bedrooms | $2,133 |
| 8 Bedrooms | $2,240 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $930 | $156,153 | 0.6% | F |
| 3BR | $1,170 | $229,991 | 0.51% | F |
| 4BR | $1,520 | $304,721 | 0.5% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate scenario for ZIP code 40033, Lebanon, KY, reveals a significant discrepancy between Federal Market Rent (FMR) and market rent figures. Using the annualized 2BR FMR of $890 for fiscal year 2026, the potential rental income for a property in this category would be $10,680 per year. Given the median home value of $228,177, this translates into an implied gross yield of approximately 4.7%. The calculation is straightforward: $10,680 divided by $228,177 equals 0.047, or 4.7%.
In contrast, using the Census ACS-reported market rent of $731 per month, the annual rental income drops to $8,772. This results in a markedly lower implied gross yield of about 3.9%, calculated by dividing $8,772 by $228,177. The difference between these two yields is substantial, reflecting the varying levels of support that Section 8 can provide compared to the general rental market.
Given the 29.7% renter density in Lebanon, KY, it's important to consider which of these yields is more realistic. The FMR-based yield assumes full occupancy by Section 8 tenants, which is unlikely given the relatively low renter population. However, the N/A-day Days on Market (DOM) suggests that there might be limited data on how quickly properties are rented out, making it difficult to predict turnover rates accurately.
The market rent yield, at 3.9%, provides a clearer picture of what landlords might expect if they rely solely on the local rental market without Section 8 subsidies. It aligns more closely with the reality of having a significant portion of owner-occupied homes, which means landlords must compete for a smaller pool of renters. Therefore, while the FMR yield offers a higher return, the market rent yield is more reflective of the actual conditions in Lebanon, KY, where only a fraction of the housing stock is dedicated to renting.
Investors should use these gross yields as a starting point for their calculations. The choice between relying on Section 8 subsidies or targeting the broader rental market will depend on individual investment strategies and risk tolerance. In either case, understanding the underlying rental dynamics and the proportion of renters in the area is crucial for making informed decisions.
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.