Location: Sioux Falls, SD | Metro: Sioux City, IA-NE-SD MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $780 |
| 1 Bedroom | $890 |
| 2 Bedrooms | $1,050 |
| 3 Bedrooms | $1,430 |
| 4 Bedrooms | $1,750 |
| 5 Bedrooms | $2,030 |
| 6 Bedrooms | $2,274 |
| 7 Bedrooms | $2,456 |
| 8 Bedrooms | $2,579 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 57001 provides valuable insights into investment potential. The Fair Market Rent (FMR) for a two-bedroom apartment in this area for FY 2024 is set at $910 annually, while the market rent based on Census ACS data stands at $839. Using these figures against the median home value of $288,084, we can derive the implied gross-yields.
First, let's annualize the FMR of $910. This equates to an annual rental income of $10,920 for a two-bedroom property. Dividing this by the median home value gives us an implied gross-yield of approximately 3.8%. On the other hand, the market rent of $839 translates to an annual rental income of $10,068, leading to an implied gross-yield of about 3.5%.
To determine which scenario is more realistic, consider the local rental market dynamics. With a renter density of 25%, it suggests that a significant portion of the housing stock is owner-occupied, potentially limiting the pool of available tenants. However, the fact that the Days on Market (DOM) is listed as N/A indicates either a robust demand for rentals or a lack of recent sales data to provide a comprehensive view of market activity.
Given the higher FMR compared to the market rent, the 3.8% yield derived from the FMR appears more optimistic. In reality, landlords might find it challenging to secure tenants willing to pay the higher FMR consistently due to the competition from market rates. Therefore, the 3.5% yield based on market rent seems more pragmatic, aligning with what landlords could reasonably expect under typical market conditions.
In conclusion, while the Section 8 program offers a guaranteed rent of $910 per month, the actual performance of investments in ZIP 57001 should be assessed using the lower market rent figure. This yields a more conservative estimate of 3.5%, which is likely to be closer to the realized returns, considering the local rental environment and tenant availability.
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.