Location: Poweshiek County, IA | Metro: Jasper County, IA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $710 |
| 1 Bedroom | $830 |
| 2 Bedrooms | $990 |
| 3 Bedrooms | $1,370 |
| 4 Bedrooms | $1,400 |
| 5 Bedrooms | $1,624 |
| 6 Bedrooms | $1,819 |
| 7 Bedrooms | $1,965 |
| 8 Bedrooms | $2,063 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 50242 reveals some interesting dynamics between federal market rent (FMR) subsidies and market rents. For a two-bedroom property, the annualized FMR subsidy amount for FY 2024 is $860. This figure needs to be contextualized within the broader rental market where the average market rent for a similar unit is $856, based on Census ACS data.
To derive the implied gross yield for both scenarios, we first need to understand that the median home value in ZIP 50242 is $220,884. The gross yield is calculated as the annual rent divided by the property value. In the case of the FMR subsidy scenario, the annual rent would be $10,320 ($860 x 12 months), leading to an implied gross yield of approximately 4.7% ($10,320 / $220,884).
Contrastingly, if we consider the market rent of $856, the annual rent would be $10,272 ($856 x 12 months), resulting in an implied gross yield of about 4.65% ($10,272 / $220,884). This slight difference in gross yields between the two scenarios is negligible and does not significantly impact the overall investment decision.
Given the 38.1% renter density in ZIP 50242, it's important to note that the number of days on market (DOM) is listed as N/A, which could indicate a robust rental market with quick turnover. However, the data does not provide enough detail to make definitive conclusions about the speed of property leasing. Despite this, the gross yield comparison suggests that the market rent is slightly more favorable, but the difference is minimal.
In practice, landlords and small-portfolio investors should consider the stability and predictability of Section 8 rents versus the potential variability in market rents. While the gross yield is nearly identical at 4.7% for FMR and 4.65% for market rent, the actual performance can vary due to factors such as tenant behavior, maintenance costs, and vacancy rates. Therefore, choosing between Section 8 and market rents should be based on individual risk tolerance and long-term investment goals.
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.