Location: Otter Tail County, MN | Metro: Grant County, MN
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 | $760 |
| 1 Bedroom | $830 |
| 2 Bedrooms | $1,090 |
| 3 Bedrooms | $1,500 |
| 4 Bedrooms | $1,520 |
| 5 Bedrooms | $1,763 |
| 6 Bedrooms | $1,975 |
| 7 Bedrooms | $2,133 |
| 8 Bedrooms | $2,240 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,090 | $186,085 | 0.59% | F |
| 3BR | $1,500 | $234,587 | 0.64% | D |
| 4BR | $1,520 | $297,199 | 0.51% | F |
U.S. Census Bureau data (2024)
The potential pitfalls of investing in Section 8 housing in ZIP code 56537, located in Fergus Falls, MN, include significant tenant turnover, which can be costly due to the difference between the market rent of $965 and the Fair Market Rent (FMR) of $990 for FY 2026 in the metro area. This discrepancy suggests that landlords might struggle to find tenants willing to pay the higher FMR set by the government, leading to frequent turnover.
Vacancy exposure is another concern. The average days on market (DOM) for rental properties is not available, indicating a lack of data on how long units typically remain vacant. In a market with unpredictable vacancy rates, landlords must be prepared for periods when their property is unoccupied, reducing cash flow and increasing reliance on reserves.
Deferred maintenance is also a risk, especially considering the typical home value of $237,317 and the median income of $65,473. Landlords may face challenges in maintaining properties to meet the standards required by the Housing Choice Voucher program without overburdening tenants with maintenance costs, which they might be unable to afford.
However, these risks are somewhat mitigated by the high renter share of 28.7%. A large proportion of renters often correlates with higher demand for housing vouchers, providing a steady stream of potential tenants who qualify for Section 8 assistance. This demand can help ensure consistent occupancy and reduce the likelihood of extended vacancy periods.
Verdict: Moderate risk for a first-time Section 8 landlord.
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.