Location: Jackson County, MN | Metro: Jackson County, MN
| Unit Size | Monthly FMR |
|---|---|
| Studio | $760 |
| 1 Bedroom | $940 |
| 2 Bedrooms | $1,080 |
| 3 Bedrooms | $1,420 |
| 4 Bedrooms | $1,450 |
| 5 Bedrooms | $1,682 |
| 6 Bedrooms | $1,884 |
| 7 Bedrooms | $2,035 |
| 8 Bedrooms | $2,137 |
U.S. Census Bureau data (2024)
The analysis of Section 8 cap rates for ZIP code 56161 presents a unique challenge due to the lack of complete market data. However, using the available Fair Market Rent (FMR) figures, we can still provide some insight into potential investment scenarios.
In ZIP 56161, the annualized Fair Market Rent for a 2-bedroom unit in fiscal year 2026 is set at $1,030. This figure is based on the metropolitan area standard and does not reflect local market conditions. To calculate the implied gross yield, we would need the median home value. Unfortunately, the median home value for ZIP 56161 is not available, making it impossible to derive an exact cap rate. However, we can still discuss the implications of the given FMR and market rent data.
The Fair Market Rent of $1,030 per month equates to $12,360 annually. If we hypothetically assume a median home value and apply typical financing terms, we could estimate the gross yield. For instance, if the median home value were $200,000 and financed at a 75% loan-to-value ratio with a 5% interest rate, the monthly mortgage payment would be around $875. This leaves a potential cash flow of approximately $155 per month, or $1,860 annually, from the Section 8 rental income. The implied gross yield in this scenario would be about 0.93%, calculated as $1,860 divided by the $200,000 median home value.
Market rent data is also not available, which makes it difficult to compare the gross yields directly. Typically, market rents exceed FMRs, leading to higher gross yields. However, without specific figures, we cannot provide a precise comparison. Given the 4.1% renter density in ZIP 56161, the likelihood of finding tenants who qualify for Section 8 vouchers is relatively low. This suggests that relying solely on Section 8 rental income might not be the most prudent strategy for maximizing returns.
The days on market (DOM) figure is also not available, which further complicates the analysis. A high DOM could indicate challenges in renting out properties, especially under Section 8. Conversely, a low DOM might suggest strong demand for rental housing, potentially benefiting from market rents.
Conclusion: While the Section 8 FMR provides a baseline for rental income, the lack of market rent data and median home value limits our ability to give a comprehensive cap-rate analysis. The implied gross yield based on the hypothetical median home value is low at 0.93%. Given the limited renter density and the absence of market rent data, it's advisable for investors to consider a mix of Section 8 and market-rate rentals to achieve a more balanced and profitable investment portfolio.
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.