Location: Union County, KY | Metro: Crittenden 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 | $670 |
| 1 Bedroom | $700 |
| 2 Bedrooms | $910 |
| 3 Bedrooms | $1,080 |
| 4 Bedrooms | $1,240 |
| 5 Bedrooms | $1,438 |
| 6 Bedrooms | $1,611 |
| 7 Bedrooms | $1,740 |
| 8 Bedrooms | $1,827 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $910 | $75,784 | 1.2% | A |
| 3BR | $1,080 | $134,497 | 0.8% | C |
| 4BR | $1,240 | $197,395 | 0.63% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 42459, located in Sturgis, KY, provides valuable insights into potential investment opportunities. For a two-bedroom property, the Fair Market Rent (FMR) set by HUD for fiscal year 2026 is $870 per month, while the market rent based on Census ACS data stands at $663 per month. Using these figures, we can calculate the implied gross yields for both scenarios.
First, let's annualize the FMR. At $870 per month, the annual rent would be $10,440. Dividing this by the median home value of $109,434 gives us an implied gross yield of approximately 9.54%. This means that if a landlord were to rent out a property at the FMR, they could expect to earn nearly 9.54% of the property's value annually before expenses.
Next, we'll annualize the market rent. At $663 per month, the annual rent would be $7,956. When divided by the median home value of $109,434, this yields an implied gross yield of about 7.27%. Thus, renting at market rates would result in a lower annual return, approximately 7.27% of the property's value before expenses.
The difference between these two yields highlights the trade-off landlords face when considering participation in the Section 8 program. While the FMR scenario offers a higher gross yield, it is important to consider the actual demand for rental properties in the area. With a renter density of 27.1%, the market suggests that less than a third of households are likely to be renters, which could impact the availability of tenants willing to pay the FMR.
The N/A-day DOM (Days on Market) indicates incomplete data, possibly due to low turnover rates or other factors that make it difficult to determine how quickly properties are rented. However, given the relatively low renter density, it is more realistic to assume that market rents might be closer to what landlords can actually achieve, rather than the higher FMR rates.
In conclusion, while the FMR scenario presents a more attractive gross yield, the market conditions suggest that achieving this rate may be challenging. Landlords and small-portfolio investors should focus on the more realistic market rent scenario, which implies a gross yield of around 7.27%, when making investment decisions in ZIP code 42459.
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.