Location: Louisville, KY | Metro: Louisville, KY-IN 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 | $1,010 |
| 1 Bedroom | $1,090 |
| 2 Bedrooms | $1,320 |
| 3 Bedrooms | $1,680 |
| 4 Bedrooms | $1,940 |
| 5 Bedrooms | $2,250 |
| 6 Bedrooms | $2,520 |
| 7 Bedrooms | $2,722 |
| 8 Bedrooms | $2,858 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,320 | $191,885 | 0.69% | D |
| 3BR | $1,680 | $233,977 | 0.72% | D |
| 4BR | $1,940 | $277,995 | 0.7% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 40118 in Louisville, KY, reveals an interesting picture when comparing the Federal Market Rent (FMR) and the actual market rent figures against the median home value.
Using the annualized 2BR FMR of $1370 for fiscal year 2024, the implied gross yield is calculated as follows:
In contrast, using the Census ACS reported market rent of $1,124 for a 2BR unit, the implied gross yield is:
The gross yield derived from the FMR scenario is higher at 8.0%, while the market rent scenario yields a lower rate of 6.5%. Given that the renter density in ZIP 40118 is 33.5%, it's important to consider how many units might be occupied by Section 8 tenants versus market-rate renters. The N/A-day DOM (Days On Market) indicates that there is either insufficient data or the market is moving quickly, making it difficult to assess the typical vacancy period.
While the FMR scenario suggests a more attractive gross yield, the actual market rent figure is likely to be more reflective of what landlords can expect in terms of rental income. The higher FMR rate is set by the government to ensure affordable housing, but it does not necessarily represent the prevailing market conditions. Therefore, the 6.5% gross yield based on market rent is a more realistic expectation for landlords and small-portfolio investors in ZIP 40118.
Investors should also factor in the potential stability of Section 8 rents versus the volatility of market rates. However, the gross yield comparison clearly shows that relying on market rent provides a more grounded outlook on the financial returns from properties in this area.
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.