Location: Red Lake County, MN | Metro: Grand Forks, ND-MN MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $780 |
| 1 Bedroom | $790 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,370 |
| 4 Bedrooms | $1,650 |
| 5 Bedrooms | $1,914 |
| 6 Bedrooms | $2,144 |
| 7 Bedrooms | $2,316 |
| 8 Bedrooms | $2,432 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 56750 reveals two distinct scenarios based on the Federal Market Rent (FMR) and the market rent data.
Using the annualized 2BR FMR of $910 for FY 2024, the implied gross yield for a property in ZIP 56750 would be approximately 4.15%. This calculation is derived by taking the annual rent ($910) and dividing it by the median home value ($218,756), which yields a percentage of 4.15%. However, this figure assumes that the entire median home value is the purchase price, which is often not the case in reality.
In contrast, using the market rent of $513 from the Census ACS, the implied gross yield drops significantly to about 2.35%. This lower yield is calculated similarly, by dividing the annual market rent ($513 * 12 months = $6,156) by the median home value ($218,756).
The 15.8% renter density suggests a moderate rental market, but does not provide enough context to determine the exact viability of either scenario without additional information on vacancy rates and competition. The N/A-day DOM (days on market) indicates incomplete data regarding how quickly properties are rented out, further complicating the assessment.
Given the higher implied gross yield of 4.15% based on the FMR versus the market rent yield of 2.35%, the FMR scenario appears more favorable at first glance. However, it's important to note that the FMR is typically higher than market rents due to government subsidies, and thus may not reflect actual market conditions. The lower gross yield of 2.35% based on market rent is likely more realistic for long-term investment considerations, as it reflects the actual rental market dynamics.
Investors should also consider the potential for rent stabilization and the impact of Section 8 on property values over time. While the FMR provides a higher immediate income, the market rent scenario offers a clearer picture of sustainable cash flow in the absence of subsidies.
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.