Location: Sanborn County, SD | Metro: Aurora County, SD
| Unit Size | Monthly FMR |
|---|---|
| Studio | $730 |
| 1 Bedroom | $950 |
| 2 Bedrooms | $1,050 |
| 3 Bedrooms | $1,450 |
| 4 Bedrooms | $1,660 |
| 5 Bedrooms | $1,926 |
| 6 Bedrooms | $2,157 |
| 7 Bedrooms | $2,330 |
| 8 Bedrooms | $2,447 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 57385 reveals two distinct scenarios based on the Fair Market Rent (FMR) and the market rent. Using the annualized 2BR FMR of $930 for fiscal year 2026, the potential rental income per unit would be $11,160 annually. Against the median home value of $233,172, this implies a gross yield of approximately 4.8%. In contrast, using the market rent figure of $670 derived from the Census ACS, the annual rental income would be $8,040, leading to a gross yield of about 3.4%.
To determine which scenario is more realistic, consider the 20.0% renter density in ZIP 57385. This relatively low percentage suggests that the market may not support consistently high rental rates, making the lower market rent of $670 more plausible. The FMR of $930, while higher, is set by HUD and represents the maximum allowable rent for Section 8 vouchers. Actual rents collected might fall below this benchmark due to various factors such as local competition, property condition, and tenant preferences.
The lack of data on days on market (DOM) means we cannot directly assess how quickly properties are leased at either rate. However, given the lower renter density, it is reasonable to assume that achieving the higher FMR could take longer, potentially impacting cash flow and occupancy rates. For landlords and small-portfolio investors, the $670 market rent scenario offers a more conservative and likely achievable gross yield of 3.4%, whereas the FMR-based yield of 4.8% may be aspirational without guarantees of sustained occupancy at those levels.
In conclusion, while the Section 8 program can offer a gross yield of 4.8% based on the FMR, the practical considerations of the local market suggest that the actual rental income may align more closely with the market rent, resulting in a gross yield of 3.4%. This analysis provides a clear picture of the potential returns and helps investors make informed decisions regarding their investments in ZIP code 57385.
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.