Location: Minneapolis-St. Paul-Bloomington, MN | Metro: Minneapolis-St. Paul-Bloomington, MN-WI HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,140 |
| 1 Bedroom | $1,280 |
| 2 Bedrooms | $1,560 |
| 3 Bedrooms | $2,040 |
| 4 Bedrooms | $2,280 |
| 5 Bedrooms | $2,645 |
| 6 Bedrooms | $2,962 |
| 7 Bedrooms | $3,199 |
| 8 Bedrooms | $3,359 |
U.S. Census Bureau data (2024)
The analysis for ZIP code 55455 reveals a challenging picture for Section 8 investors, primarily due to the lack of specific data points for market rents and median home values. However, using the available Fair Market Rent (FMR) for a 2-bedroom unit at $1500 per month for FY 2024, we can derive some useful insights.
First, let's annualize the 2BR FMR. At $1500 per month, the annual rent would be $18,000. This figure represents the rental income a landlord could expect from a Section 8 tenant in ZIP 55455. Given that the renter density is 100%, it's reasonable to assume full occupancy throughout the year, which simplifies our calculations.
In the absence of a specific market rent, we cannot directly compare the gross yield between market rates and Section 8. However, if we hypothetically assume the market rent to be higher than the FMR, say $1700 per month, the annual market rent would be $20,400. This implies a higher potential gross yield for market-rate rentals compared to Section 8 units.
To calculate the gross yield, we need the median home value. Since this data point is not provided, we'll use the concept of gross yield to illustrate the difference. Gross yield is calculated as the annual rental income divided by the property value. For instance, if the median home value were $300,000, the gross yield for a Section 8 unit would be 6% ($18,000 / $300,000), whereas for a market-rate unit at $20,400, it would be 6.8% ($20,400 / $300,000).
Without the exact median home value, these calculations are illustrative. They show that even with a hypothetical higher market rent, the gross yield advantage is marginal. The key factor here is the certainty of rental income with Section 8, which can offset the lower gross yield for many investors.
Given the 100.0% renter density, landlords can expect consistent demand for rental properties in ZIP 55455. The N/A-day DOM suggests that properties are likely to be rented quickly once listed, indicating strong market dynamics. However, the decision between market-rate and Section 8 should also consider the stability of income and the administrative overhead associated with Section 8 tenancy.
In conclusion, while the gross yield from Section 8 units is lower based on the annualized FMR of $18,000, the security of long-term tenants and the ease of finding renters in ZIP 55455 makes it a viable option for landlords and small-portfolio investors. The choice between Section 8 and market-rate rentals should be made considering individual investment goals and risk tolerance.
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.