Location: Houghton County, MI | Metro: Houghton County, MI
| Unit Size | Monthly FMR |
|---|---|
| Studio | $790 |
| 1 Bedroom | $790 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,410 |
| 4 Bedrooms | $1,700 |
| 5 Bedrooms | $1,972 |
| 6 Bedrooms | $2,209 |
| 7 Bedrooms | $2,386 |
| 8 Bedrooms | $2,505 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 49963 provides insight into potential investment yields. To begin, let's look at the Federal Market Rent (FMR) for a two-bedroom apartment, which is set at $970 annually for Fiscal Year 2026. Given the median home value of $142,974, the implied gross yield for a property rented under Section 8 would be approximately 6.78%. This calculation is derived by dividing the annualized FMR by the median home value.
In contrast, the market rent for a two-bedroom unit in ZIP 49963 is reported at $817 annually based on Census ACS data. Using the same median home value, this implies a gross yield of about 5.71%. Clearly, the Section 8 scenario offers a higher gross yield compared to the market rent scenario.
However, when assessing which scenario is more realistic, several factors must be considered. The renter density in ZIP 49963 is 25.9%, indicating that a significant portion of residents are homeowners rather than renters. This suggests that the demand for rental properties, including those under Section 8, might be lower relative to the number of available homes. Additionally, the Days on Market (DOM) being listed as N/A could imply that either there isn't enough data to determine how quickly rental units are leased, or that the leasing process is lengthy and unpredictable.
The higher gross yield offered by Section 8 properties comes with the trade-off of potentially lower occupancy rates and longer lease durations due to the bureaucratic nature of the program. For landlords and small-portfolio investors, it's crucial to weigh these factors against the stability provided by government-backed rental payments. While the 6.78% gross yield from Section 8 appears more attractive on paper, the actual performance may depend heavily on the local rental market dynamics and the ease of finding tenants willing to participate in the Section 8 program.
To summarize, the Section 8 cap rate scenario for ZIP 49963 offers a gross yield of 6.78% based on the $970 annualized FMR, whereas the market rent scenario yields 5.71%. Given the 25.9% renter density and the lack of DOM data, the market rent scenario may be more practical for most investors, despite offering a lower gross yield. However, for those who can manage the administrative requirements and find stable Section 8 tenants, the higher yield could prove beneficial.
Data Sources: FMR data from HUD (2027). 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.