Location: Indianapolis-Carmel, IN | Metro: Indianapolis-Carmel, 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 | $1,530 |
| 1 Bedroom | $1,720 |
| 2 Bedrooms | $1,980 |
| 3 Bedrooms | $2,570 |
| 4 Bedrooms | $3,130 |
| 5 Bedrooms | $3,631 |
| 6 Bedrooms | $4,067 |
| 7 Bedrooms | $4,392 |
| 8 Bedrooms | $4,612 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,980 | $246,547 | 0.8% | C |
| 3BR | $2,570 | $244,209 | 1.05% | B |
| 4BR | $3,130 | $297,900 | 1.05% | B |
| 5BR | $3,631 | $355,167 | 1.02% | B |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 46231 in Indianapolis, IN, reveals a distinct gap between the federally mandated Fair Market Rent (FMR) and the actual market rents. For a two-bedroom property, the annualized FMR for fiscal year 2024 is $1970, while the Zillow Observed Rent Index (ZORI) places the market rent at $2048 per month.
To derive the gross yield, we first calculate the annual rent under both scenarios. At $1970 per month, the annual rent is $23,640. Given the median home value of $257,449, this translates into an implied gross yield of approximately 9.2%. In contrast, if the property rents at the market rate of $2048 per month, the annual rent would be $24,576, resulting in a gross yield of about 9.6%.
Considering the 21.3% renter density in the area, it's important to note that the majority of homes are owner-occupied, which could impact the demand for rental properties, including those participating in the Section 8 program. However, the lack of data regarding the number of days on market (DOM) makes it challenging to assess the speed at which properties are rented out, particularly under the Section 8 program.
The gross yield comparison indicates that renting at the market rate would provide a slightly higher return, at 9.6%, compared to the FMR rate of 9.2%. This difference, though small, can be significant for investors when considering the overall performance of their portfolio. The market rate scenario is more likely to reflect the true earning potential of a property in ZIP 46231, assuming the landlord can secure a tenant willing to pay the higher rent. However, the Section 8 program typically caps rent at the FMR, meaning the 9.2% gross yield is the more realistic expectation for landlords participating in the program.
In conclusion, while the market rent offers a marginally better gross yield, the reality of the Section 8 program means that landlords should expect a gross yield closer to 9.2% based on the $1970 FMR. This analysis provides a clear picture of the potential returns and helps investors understand the financial landscape of ZIP 46231.
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.