Location: Des Moines-West Des Moines, IA | Metro: Des Moines-West Des Moines, IA 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 | $1,070 |
| 1 Bedroom | $1,110 |
| 2 Bedrooms | $1,320 |
| 3 Bedrooms | $1,800 |
| 4 Bedrooms | $1,850 |
| 5 Bedrooms | $2,146 |
| 6 Bedrooms | $2,404 |
| 7 Bedrooms | $2,596 |
| 8 Bedrooms | $2,726 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,110 | $267,483 | 0.41% | F |
| 2BR | $1,320 | $214,194 | 0.62% | D |
| 3BR | $1,800 | $302,537 | 0.59% | F |
| 4BR | $1,850 | $394,858 | 0.47% | F |
| 5BR | $2,146 | $624,870 | 0.34% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 50265, located in West Des Moines, IA, provides insight into potential investment returns under government rental assistance programs versus market conditions. For the fiscal year 2024, the Fair Market Rent (FMR) for a two-bedroom apartment in this ZIP code is set at $1,080 annually. In contrast, the market rent, as indicated by the Zillow Observed Rent Index (ZORI), stands at $1,250 per month.
To derive the cap rate, we first calculate the gross yield. Using the median home value of $309,774, the annualized Section 8 rent of $1080 translates to a gross yield of approximately 0.41%. This is calculated by taking the annual rent ($1080) and dividing it by the median home value ($309,774). On the other hand, the market rent of $1,250 per month amounts to an annual gross yield of about 4.85%, calculated by multiplying the monthly rent by 12 months and then dividing by the median home value.
The significant disparity between these yields reflects the difference in income generated from Section 8 tenants compared to market-rate renters. The lower gross yield of 0.41% associated with Section 8 rent suggests that this program is not a lucrative option for generating immediate cash flow based on property value alone. However, it does provide stable, long-term income with minimal risk of vacancy, given the high demand for affordable housing.
In terms of realism, the market rent scenario with a gross yield of 4.85% is more reflective of typical investment outcomes in West Des Moines. This is due to the relatively low renter density of 33.6%, indicating that most residents prefer homeownership over renting. Additionally, the Days on Market (DOM) figure of 43 days implies that properties in this area sell quickly, further suggesting a strong preference for owning homes rather than renting them out.
While the Section 8 program can offer steady income and reduced vacancy risk, it is important for investors to consider the overall economic environment and the specific needs of the local community. Given the strong homeowner market in West Des Moines, it is likely that fewer landlords will find the Section 8 gross yield appealing relative to the higher yields available through market-rate rentals.
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.