Location: Hanson County, SD | Metro: Sioux Falls, SD HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $800 |
| 1 Bedroom | $940 |
| 2 Bedrooms | $1,080 |
| 3 Bedrooms | $1,490 |
| 4 Bedrooms | $1,760 |
| 5 Bedrooms | $2,042 |
| 6 Bedrooms | $2,287 |
| 7 Bedrooms | $2,470 |
| 8 Bedrooms | $2,594 |
U.S. Census Bureau data (2024)
A skeptical investor looking into ZIP code 57374 might have several concerns regarding the feasibility of investing in Section 8 properties here. Let's address these concerns directly using available data.
Objection 1: Will Fair Market Rent (FMR) of $910 cover the mortgage on a $269,572 home?
The Fair Market Rent (FMR) for ZIP 57374 in fiscal year 2024 is set at $910. To determine if this amount can cover the mortgage on a home priced at $269,572, we need to consider the typical interest rates and loan terms. Assuming a 30-year fixed-rate mortgage with an average rate of 5%, the monthly mortgage payment on a $269,572 home would be approximately $1,450. This means that the FMR alone is insufficient to cover the mortgage payment. However, it's important to note that FMR is not the only income source; landlords can also charge tenants for utilities, which can increase the overall rental income.
Objection 2: Is there enough renter demand at 8.3%?
The vacancy rate for ZIP 57374 stands at 8.3%. While this rate suggests a moderate level of demand, it's crucial to understand that the vacancy rate does not directly correlate with the number of potential Section 8 tenants. The percentage of renters who qualify for Section 8 assistance is often lower than the overall vacancy rate, and ZIP 57374 might have a smaller pool of eligible participants. Landlords should research local housing authorities to gauge the number of Section 8 vouchers available and the wait times for qualification. Despite the moderate vacancy rate, the actual demand for Section 8 properties could still be strong due to limited affordable housing options.
Objection 3: Will vouchers keep pace with $440 market rents?
The average market rent in ZIP 57374 is $440, significantly below the FMR of $910. This gap indicates that the voucher amounts are higher than what most tenants would pay on the open market. However, the question remains whether the voucher amounts will continue to match the rising costs of maintaining and financing properties. According to HUD guidelines, FMRs are adjusted annually based on changes in the housing market. If the market rents rise closer to the FMR, then the vouchers should theoretically follow suit. Yet, there is no guarantee that the increases will perfectly align with market conditions. Investors must monitor local market trends and federal adjustments closely to ensure sustained profitability.
In summary, while the data provides some clarity on the financial aspects of investing in Section 8 properties in ZIP 57374, it does not fully resolve all concerns. The FMR of $910 is likely to require additional income sources to cover a mortgage payment of around $1,450. The vacancy rate of 8.3% may not accurately reflect the demand for Section 8 properties specifically. Lastly, the current gap between market rents and voucher amounts offers a buffer, but future alignment cannot be guaranteed without ongoing monitoring of both local and federal adjustments.
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.