Location: Duluth, MN | Metro: Duluth, MN-WI MSA
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 | $840 |
| 1 Bedroom | $960 |
| 2 Bedrooms | $1,210 |
| 3 Bedrooms | $1,680 |
| 4 Bedrooms | $2,020 |
| 5 Bedrooms | $2,343 |
| 6 Bedrooms | $2,624 |
| 7 Bedrooms | $2,834 |
| 8 Bedrooms | $2,976 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $960 | $151,386 | 0.63% | D |
| 2BR | $1,210 | $198,694 | 0.61% | D |
| 3BR | $1,680 | $232,596 | 0.72% | D |
| 4BR | $2,020 | $269,270 | 0.75% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 55807 in Duluth, MN, provides valuable insights into the potential returns for landlords and small-portfolio investors. To begin, let's annualize the Fair Market Rent (FMR) and Zillow Observed Rent Index (ZORI) figures for a two-bedroom property. The FMR for a 2BR unit in ZIP 55807 for fiscal year 2024 is set at $1060 per month, while the market rent as indicated by ZORI stands at $1,594 per month.
The median home value in ZIP 55807 is $203,421. Using this figure, we can calculate the implied gross yield for both scenarios. For the FMR scenario, the annual rent income would be $12,720 ($1060 * 12 months), resulting in an implied gross yield of approximately 6.25%. This is calculated by dividing the annual rent income by the median home value: $12,720 / $203,421 = 0.0625 or 6.25%. In contrast, the market rent scenario would generate an annual income of $19,128 ($1,594 * 12 months), leading to an implied gross yield of about 9.40%: $19,128 / $203,421 = 0.0940 or 9.40%.
Given that only 28.4% of residents in ZIP 55807 are renters, it's important to consider the likelihood of securing tenants under either the FMR or market rent conditions. While the market rent scenario offers a higher gross yield, the limited rental demand suggests that landlords might struggle to maintain occupancy rates consistently at this level. On the other hand, the FMR scenario, although offering a lower gross yield, aligns more closely with the government-subsidized housing program, ensuring a steady stream of income for those who qualify as Section 8 landlords.
The N/A-day Days on Market (DOM) indicates that there isn't sufficient data to determine how quickly properties are rented out in this area, which could mean either a highly competitive or a less active rental market. However, considering the rental density, the FMR scenario appears more realistic for long-term stability and predictability. Landlords should weigh the benefits of higher yields against the risks of vacancy and tenant turnover when deciding whether to participate in the Section 8 program or aim for market rents.
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.