Location: Mahnomen County, MN | Metro: Mahnomen County, MN
| Unit Size | Monthly FMR |
|---|---|
| Studio | $710 |
| 1 Bedroom | $780 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,280 |
| 4 Bedrooms | $1,550 |
| 5 Bedrooms | $1,798 |
| 6 Bedrooms | $2,014 |
| 7 Bedrooms | $2,175 |
| 8 Bedrooms | $2,284 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 56566 reveals some interesting dynamics when comparing the federal market rent (FMR) to the actual market rent. For a two-bedroom apartment, the annualized FMR as of fiscal year 2026 is set at $970 per month, while the market rent stands at $400 per month based on Census ACS data.
The implied gross yield for the FMR scenario is calculated by taking the monthly rental income of $970 and multiplying it by 12 months, resulting in an annual income of $11,640. The implied gross yield for the market rent scenario, using the monthly rent of $400, would be $4,800 annually. These figures suggest that the gross yield under the Section 8 program is significantly higher compared to the general market rent.
Given the 46.8% renter density in ZIP 56566, it's important to note that the Section 8 rental rates are more stable and less likely to fluctuate compared to market rates. However, the median home value being N/A indicates a lack of recent sales data, making it difficult to determine the exact property values and thus the precise cap rate. The days on market (DOM) being N/A also suggests limited activity in property transactions, which can affect the liquidity and demand for rental properties.
Despite these uncertainties, the higher gross yield from the Section 8 program makes it a more attractive option for landlords and small-portfolio investors looking for consistent income. The stability provided by the Section 8 program ensures a predictable cash flow, which is beneficial in areas with high renter density and potentially volatile market conditions. While the market rent offers lower returns, it might still appeal to those who prefer flexibility in tenant selection and rental terms.
In conclusion, the Section 8 cap rate for ZIP 56566, based on the FMR of $970 per month, provides a more substantial gross yield of $11,640 annually compared to the market rent of $4,800 annually. This makes the Section 8 program a more realistic and lucrative choice for landlords and investors seeking reliable rental income in this area.
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.