Location: Fillmore County, MN | Metro: Fillmore County, MN HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $770 |
| 1 Bedroom | $780 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,340 |
| 4 Bedrooms | $1,340 |
| 5 Bedrooms | $1,554 |
| 6 Bedrooms | $1,740 |
| 7 Bedrooms | $1,879 |
| 8 Bedrooms | $1,973 |
U.S. Census Bureau data (2024)
A decision tree for whether to invest in ZIP code 55935 for Section 8 properties hinges on three key factors: financial feasibility, rental market conditions, and demand stability.
Step 1: Can the Fair Market Rent (FMR) of $910 cover the debt service on a property valued at $357,815?
If Yes: The FMR of $910 is sufficient to cover the debt service, making the investment financially viable. Proceed to Step 2.
If No: Do not proceed with the purchase as the FMR does not sufficiently cover the cost of owning the property. Financial sustainability is critical for long-term success in Section 8 investments.
Step 2: How does the market rent of $765 compare to the FMR of $910?
If Market Rent is Below FMR: The market rent of $765 is lower than the FMR, which means that Section 8 tenants will likely pay a higher rent than what the local market offers. This can be advantageous as it reduces the risk of vacancy. Move to Step 3.
If Market Rent is Equal to or Above FMR: The market rent is competitive with or exceeds the FMR. Landlords might face challenges in attracting Section 8 tenants due to the higher rent compared to what they can get elsewhere. Consider other areas where the FMR is higher relative to the market rent.
Step 3: Is there sufficient demand for rental units in ZIP 55935 given that 14.7% of residents are renters and the days on market (DOM) data is not available?
If Demand is Sufficient: With 14.7% of residents being renters, there is a notable base of potential tenants. However, the lack of DOM data makes it challenging to assess how quickly rental units are filled. In this scenario, you must rely on other indicators such as vacancy rates or consult local real estate agents for insights into the speed of leasing units. If these additional data points suggest strong demand, then the answer is Yes.
If Demand is Insufficient: If further investigation reveals that the percentage of renters is too low or that units take an extended period to lease, then the answer is No. Stable demand is crucial for ensuring consistent cash flow from Section 8 properties.
If It Depends: The 14.7% of residents being renters suggests a moderate level of demand. Without DOM data, it's difficult to determine the exact speed of unit turnover. Therefore, the answer is It Depends. Further analysis of local rental trends and discussions with local real estate professionals would be necessary to make a definitive decision.
In conclusion, ZIP 55935 appears to offer a feasible opportunity for Section 8 investment if the FMR can cover debt service and if market rents are below the FMR. The lack of DOM data introduces uncertainty about demand, but the presence of renters at 14.7% indicates a potential market. Additional research and consultations with local experts are recommended to finalize the decision.
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.