Location: Mower County, MN | Metro: Fillmore County, MN HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $810 |
| 1 Bedroom | $840 |
| 2 Bedrooms | $1,100 |
| 3 Bedrooms | $1,490 |
| 4 Bedrooms | $1,570 |
| 5 Bedrooms | $1,821 |
| 6 Bedrooms | $2,040 |
| 7 Bedrooms | $2,203 |
| 8 Bedrooms | $2,313 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 55961 reveals a distinct gap between federally mandated Fair Market Rents (FMR) and prevailing market rents, which significantly impacts potential gross yields for landlords and small-portfolio investors.
Based on the data provided, the annualized FMR for a two-bedroom property in ZIP 55961 for FY 2024 is set at $1210 per month. This translates to an annual rental income of $14,520. When compared to the median home value of $208,846, the implied gross yield under the Section 8 scenario is approximately 7%. The calculation is straightforward: divide the annual rental income by the median home value, resulting in a percentage that represents the gross yield.
In contrast, the Census ACS data indicates a market rent of $761 per month for a similar two-bedroom unit. This equates to an annual rental income of $9,132. Using the same median home value, the implied gross yield based on market rent is roughly 4.4%. Again, this figure is derived by dividing the annual rental income by the median home value.
The disparity between these gross yields highlights the financial incentive for landlords to participate in the Section 8 program. However, the reality of investment decisions also hinges on other factors such as the 16.7% renter density in the area, which suggests that only a portion of the housing stock is rented out. Additionally, the N/A-day Days on Market (DOM) indicates incomplete data regarding how quickly properties are rented, which could affect the reliability of the gross yield estimates.
Given the higher gross yield under the Section 8 scenario, it appears more financially attractive. However, the actual feasibility depends on the availability of Section 8 vouchers and the willingness of tenants to utilize them in ZIP 55961. Landlords should consider these variables alongside the gross yield to make informed investment decisions.
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.