Location: McLeod County, MN | Metro: Minneapolis-St. Paul-Bloomington, MN-WI 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 | $1,130 |
| 1 Bedroom | $1,280 |
| 2 Bedrooms | $1,550 |
| 3 Bedrooms | $2,040 |
| 4 Bedrooms | $2,280 |
| 5 Bedrooms | $2,645 |
| 6 Bedrooms | $2,962 |
| 7 Bedrooms | $3,199 |
| 8 Bedrooms | $3,359 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,550 | $248,404 | 0.62% | D |
| 3BR | $2,040 | $324,644 | 0.63% | D |
| 4BR | $2,280 | $401,755 | 0.57% | F |
U.S. Census Bureau data (2024)
To determine if a landlord should invest in ZIP 55368 (Norwood Young America, MN) for Section 8 properties, follow these steps:
Step 1: Evaluate the Fair Market Rent (FMR) against the debt service of a property. The FMR for ZIP 55368 in fiscal year 2024 is $1270. For a property valued at $352,086, calculate the monthly mortgage payment based on typical financing terms. Assuming a 30-year fixed-rate mortgage at 4%, the monthly payment would be approximately $1,700. Therefore, the FMR of $1270 does not cover the debt service of $1,700.
If the answer to Step 1 is No, then the landlord should reconsider investing in this area unless they can find properties that are significantly cheaper or have lower financing costs. This is because the rent received from a Section 8 tenant will not be sufficient to cover the mortgage payments, leading to financial losses.
Step 2: Compare the market rent to the FMR. According to the Census American Community Survey (ACS), the average market rent in ZIP 55368 is $1,213. This figure is slightly below the FMR of $1270, indicating that the market rent is relatively close to the FMR but still falls short. This suggests that landlords might struggle to compete with market rates when pricing Section 8 units, but there is a reasonable alignment between the two figures.
If the market rent is Below the FMR, landlords may find it challenging to attract non-Section 8 tenants willing to pay the higher FMR rate. However, since the difference is minimal, it does not necessarily preclude investment in the area.
Step 3: Assess the rental demand. In ZIP 55368, 24.8% of residents are renters, which is a moderate percentage. However, the data shows that the days on market (DOM) for rental listings is listed as N/A, which could indicate either very quick turnover or insufficient data to make an accurate assessment. Given the limited information on DOM, focus on the percentage of renters as a primary indicator of demand.
If the rental demand is Yes, with a significant portion of the population renting, then there is a viable market for Section 8 properties. However, the lack of DOM data introduces uncertainty about how quickly properties are rented out.
In conclusion, the decision to invest in ZIP 55368 for Section 8 properties hinges on the ability to find affordable properties or secure favorable financing. With the FMR not covering the debt service on a $352,086 property, and market rent being slightly below the FMR, the investment becomes less attractive unless the landlord can offset these challenges with other factors such as low property taxes or maintenance costs. The rental demand, while present, cannot be fully assessed due to missing DOM data, but the 24.8% of renters indicates a stable market presence.
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.