Location: St. Cloud, MN | Metro: St. Cloud, MN MSA
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,100 |
| 1 Bedroom | $1,190 |
| 2 Bedrooms | $1,530 |
| 3 Bedrooms | $2,060 |
| 4 Bedrooms | $2,430 |
| 5 Bedrooms | $2,819 |
| 6 Bedrooms | $3,157 |
| 7 Bedrooms | $3,410 |
| 8 Bedrooms | $3,581 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,530 | $307,699 | 0.5% | F |
| 3BR | $2,060 | $369,372 | 0.56% | F |
| 4BR | $2,430 | $405,166 | 0.6% | F |
| 5BR | $2,819 | $483,555 | 0.58% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 56320, Cold Spring, MN, reveals interesting insights into potential investment opportunities. For a two-bedroom property, the Fair Market Rent (FMR) set by HUD for fiscal year 2024 is $1260 per month, while the market rent based on Census ACS data is $1390 per month.
To calculate the implied gross yield for a property valued at $373,393, we first annualize the rents. The annualized FMR for a two-bedroom unit is $15,120 ($1260 x 12 months), and the annualized market rent is $16,680 ($1390 x 12 months).
The implied gross yield using the FMR is approximately 4.05%. This calculation is derived from dividing the annualized FMR by the median home value: $15,120 / $373,393 = 0.0405 or 4.05%. On the other hand, the implied gross yield using the market rent is about 4.47%, calculated as $16,680 / $373,393 = 0.0447 or 4.47%.
Given the 20.2% renter density in Cold Spring, it's important to consider the likelihood of finding tenants who qualify for Section 8. The renter density suggests that a significant portion of the population might be eligible for the program, making the lower FMR scenario more plausible for many investors. However, the actual Days on Market (DOM) data is not available, which could influence how quickly a property can be rented out under either scenario.
The gross yield comparison clearly shows that relying on market rent would provide a higher return. However, the FMR scenario, while offering a slightly lower gross yield, ensures stable and government-backed income, which is critical for risk management in real estate investments. Investors should weigh these factors carefully, considering the balance between yield and the stability of rental income.
In conclusion, while the market rent offers a better gross yield at 4.47%, the FMR scenario, with a gross yield of 4.05%, represents a more secure and predictable income stream. Given the specific conditions in ZIP 56320, particularly the limited renter base, the FMR scenario is likely more realistic for most properties participating in the Section 8 program.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.