Location: Sioux Falls, SD | Metro: Sioux Falls, SD HUD Metro FMR Area
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 | $1,130 |
| 1 Bedroom | $1,250 |
| 2 Bedrooms | $1,470 |
| 3 Bedrooms | $2,030 |
| 4 Bedrooms | $2,460 |
| 5 Bedrooms | $2,854 |
| 6 Bedrooms | $3,196 |
| 7 Bedrooms | $3,452 |
| 8 Bedrooms | $3,625 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,470 | $280,504 | 0.52% | F |
| 3BR | $2,030 | $332,572 | 0.61% | D |
| 4BR | $2,460 | $383,825 | 0.64% | D |
U.S. Census Bureau data (2024)
If a landlord is considering purchasing a property in ZIP code 57003 (Baltic, SD) for Section 8 investment, they must follow a structured decision-making process based on the financial metrics and market conditions.
Step 1: Debt Service Coverage Ratio (DSCR)
The Fair Market Rent (FMR) for ZIP 57003 in fiscal year 2024 is set at $1110 per month. For a property valued at $353,441, the DSCR can be calculated using the typical mortgage rate and term. Assuming a 30-year fixed-rate mortgage at 5%, the monthly principal and interest payment would be approximately $1820. The DSCR is then calculated by dividing the FMR by the monthly debt service. In this case, $1110 / $1820 = 0.61. A DSCR of less than 1 means that the FMR does not cover the debt service. Therefore, the answer to the first question is No. FMR at $1110 does not clear the debt service on a $353,441 property.
Step 2: Market Rent Comparison
The Census American Community Survey (ACS) reports the average market rent for ZIP 57003 at $1,591. This figure is higher than the FMR of $1110. Thus, if the landlord's primary concern is market rent, they can expect to charge more than the FMR when renting out their property. However, since the FMR does not cover the debt service, this comparison alone does not justify a purchase for Section 8 investment.
Step 3: Rental Demand Assessment
The rental demand in ZIP 57003 is indicated by the percentage of renters at 17.7%. Unfortunately, the Days on Market (DOM) data is not available, which would normally help assess how quickly properties are rented. Given the limited information, the rental demand appears moderate but insufficient to support a Section 8 investment due to the low DSCR.
Decision Tree Outcome
In conclusion, for a pure Section 8 investment strategy, the financial metrics indicate that purchasing a property in ZIP 57003 for this purpose is not advisable. Landlords should look for areas where the FMR can fully cover the debt service and where there is strong rental demand supported by robust data.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.