Location: Rice County, MN | Metro: Le Sueur County, MN HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,140 |
| 1 Bedroom | $1,140 |
| 2 Bedrooms | $1,500 |
| 3 Bedrooms | $2,040 |
| 4 Bedrooms | $2,440 |
| 5 Bedrooms | $2,830 |
| 6 Bedrooms | $3,170 |
| 7 Bedrooms | $3,424 |
| 8 Bedrooms | $3,595 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 56052 provides insight into the potential returns for landlords and small-portfolio investors. The Fair Market Rent (FMR) for a two-bedroom apartment in this area for FY 2024 is set at $1570 per month. To derive the implied gross yield based on the FMR, we annualize the monthly rent, resulting in an annual rental income of $18,840. Given the median home value in ZIP 56052 is $392,869, the implied gross yield when using the FMR would be approximately 4.8%. This calculation is straightforward and based on the government-set rental rates.
However, the market rent figure is listed as N/A, indicating that there is insufficient data to provide a definitive market rent price. If we were to assume a hypothetical market rent that is higher than the FMR, the gross yield would naturally increase. For example, if the market rent were to be $2000 per month, the annualized rent would be $24,000, leading to a gross yield of about 6.1%. This scenario assumes that landlords can charge market rates and that these rates are significantly above the FMR.
Given the 5.2% renter density in ZIP 56052, it's important to consider how many potential tenants might be interested in Section 8 housing. A lower renter density suggests that finding tenants could be challenging, especially if they are limited to those eligible for Section 8. Additionally, the N/A-day Days on Market (DOM) indicates that there isn't enough historical data to predict how quickly properties might be rented out, which adds uncertainty to the investment timeline and potential cash flow.
In conclusion, while the FMR-based gross yield of 4.8% is a conservative estimate and reflects the guaranteed income stream for Section 8 properties, the hypothetical market rent scenario of 6.1% is more optimistic but less certain. Landlords should weigh the security of a steady income versus the potential for higher yields against the challenges of tenant acquisition and property management in ZIP 56052.
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.