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 | $1,120 |
| 1 Bedroom | $1,270 |
| 2 Bedrooms | $1,540 |
| 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 | $1,540 | $275,235 | 0.56% | F |
| 3BR | $2,040 | $334,626 | 0.61% | D |
| 4BR | $2,280 | $379,594 | 0.6% | D |
U.S. Census Bureau data (2024)
The Section 8 market analysis for ZIP code 55397 reveals that the HUD Fair Market Rent (FMR) of $1,300 for FY 2024 significantly exceeds the average market rent of $1,058 as reported by the Census Bureau's American Community Survey (ACS). This means that landlords and small-portfolio investors can expect to cashflow comfortably with voucher tenants at the FMR rate. The higher FMR compared to the local market rent allows for a margin of error in terms of maintenance costs and vacancies, providing a stable income source.
To further analyze the investment potential, consider the median home value in the area, which stands at $339,971. Using the FMR of $1,300, the rent-to-price ratio for ZIP 55397 is approximately 0.44%, indicating that rental properties are relatively undervalued compared to their purchase price. This ratio suggests that there is strong potential for appreciation in property values over time, making it an attractive option for investors looking to build long-term equity.
The dynamics of the local real estate market also support this analysis. With a median Days on Market (DOM) and a price-cut share that are not available (N/A), we can infer that the market is stable and that homes do not typically spend extended periods on the market or require significant price reductions to sell. This stability is beneficial for both rental and home ownership investments, as it indicates a balanced market where neither buyers nor sellers have a significant advantage.
The strongest investor angle in ZIP 55397 is appreciation, given the favorable rent-to-price ratio and the stable real estate market conditions. Investing in this area will likely provide solid returns through property value growth, complemented by the reliable cash flow from Section 8 vouchers.
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.