Location: Yellow Medicine County, MN | Metro: Lincoln County, MN
| Unit Size | Monthly FMR |
|---|---|
| Studio | $730 |
| 1 Bedroom | $820 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,350 |
| 4 Bedrooms | $1,540 |
| 5 Bedrooms | $1,786 |
| 6 Bedrooms | $2,000 |
| 7 Bedrooms | $2,160 |
| 8 Bedrooms | $2,268 |
U.S. Census Bureau data (2024)
A landlord considering ZIP 56291 for a Section 8 investment should follow these steps:
Step 1: Debt Service Coverage Ratio (DSCR)
The Fair Market Rent (FMR) for the metro area in fiscal year 2026 is $970. This amount must cover the debt service on a property valued at $255,535. To determine if this is feasible, calculate the DSCR using the FMR. If the FMR does not sufficiently cover the mortgage payments and other expenses, then the answer is No. A property priced at $255,535 requires a monthly payment that can be estimated based on typical financing terms. For instance, a 30-year fixed-rate mortgage at 4.5% would result in a monthly payment around $1,275. Since the FMR is $970, it does not clear the debt service, making this an unviable option.
Step 2: Market Rent Comparison
If the FMR clears the debt service, compare the market rent of $625 (from Census ACS) to the FMR. In ZIP 56291, the market rent is below the FMR, indicating that there is room for Section 8 tenants to pay the higher rate. However, since the FMR does not clear the debt service in this case, this step is moot. If the FMR did clear the debt service, and the market rent were still below the FMR, then the answer would be Yes, as you can potentially command a higher rent from Section 8 tenants.
Step 3: Demand Assessment
Assess the demand for rental properties in ZIP 56291. The data shows that 6.9% of the population are renters, but the Days on Market (DOM) is listed as N/A, which means we lack critical information about how quickly units are rented. Without knowing the DOM, we cannot accurately gauge the demand. If the DOM were low, indicating quick turnover, combined with a high FMR covering debt service, then the answer would be Yes. Conversely, if the DOM were high, suggesting slow rental rates, then the answer would be No. Given the incomplete data, the answer here is It Depends.
In summary, for ZIP 56291, the decision to buy for Section 8 is No, due to the FMR not clearing the debt service on a property valued at $255,535. Even though the market rent is below the FMR, which could otherwise support a positive outcome, the primary concern remains the financial feasibility of the investment. Additionally, without specific DOM data, demand cannot be fully assessed, further complicating the decision-making process.
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.