Location: Webster County, KY | Metro: Union 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 | $650 |
| 1 Bedroom | $690 |
| 2 Bedrooms | $910 |
| 3 Bedrooms | $1,230 |
| 4 Bedrooms | $1,270 |
| 5 Bedrooms | $1,473 |
| 6 Bedrooms | $1,650 |
| 7 Bedrooms | $1,782 |
| 8 Bedrooms | $1,871 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $910 | $73,933 | 1.23% | A |
| 3BR | $1,230 | $148,445 | 0.83% | C |
U.S. Census Bureau data (2024)
The Section 8 cap rate scenario for ZIP code 42404 in Clay, KY, reveals interesting dynamics when comparing the Federal Market Rent (FMR) and market rent figures. For a 2-bedroom unit, the annualized FMR set at $870 for FY 2026 implies an annual rental income of $10,440. Given the median home value of $140,625, this translates into a gross yield of approximately 7.42%. The calculation is straightforward: divide the annual rental income by the property's value.
In contrast, using the market rent figure of $764 from the Census ACS, the annual rental income drops to $9,168. This results in a gross yield of about 6.52% when compared to the median home value. The difference between these two yields highlights the variability in rental income expectations under Section 8 versus the broader market.
Evaluating which scenario is more realistic requires considering the local rental market conditions. With a renter density of 18.2%, the demand for rental properties, particularly those supported by Section 8, is relatively low. However, the lack of data on days on market (DOM) suggests that there might be challenges in accurately predicting how quickly a property could be rented out, especially if it relies solely on Section 8 vouchers.
The higher gross yield of 7.42% based on the FMR is more reflective of the potential income landlords can expect when participating in the Section 8 program. This yield assumes a steady stream of rental income guaranteed by the government, which is beneficial in areas where market rents are lower due to economic factors. In ZIP 42404, the FMR-based yield is significantly higher than the market rent yield, indicating a financial advantage for landlords willing to accept Section 8 tenants.
While the FMR scenario provides a clearer and more attractive gross yield, the actual feasibility depends on the availability of Section 8 vouchers and the willingness of tenants to occupy the units. Landlords should weigh the benefits of higher guaranteed income against the potentially longer time to secure a tenant and any associated administrative complexities.
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.