Location: Custer County, SD | Metro: Rapid City, 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 | $980 |
| 1 Bedroom | $1,080 |
| 2 Bedrooms | $1,410 |
| 3 Bedrooms | $1,870 |
| 4 Bedrooms | $2,350 |
| 5 Bedrooms | $2,726 |
| 6 Bedrooms | $3,053 |
| 7 Bedrooms | $3,297 |
| 8 Bedrooms | $3,462 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,410 | $439,593 | 0.32% | F |
| 3BR | $1,870 | $581,730 | 0.32% | F |
U.S. Census Bureau data (2024)
A skeptical investor looking into ZIP 57751, Keystone, SD, might raise several concerns regarding the feasibility of investing in properties for Section 8 tenants. Here, we address those concerns with the available data.
Objection 1: Will Fair Market Rent (FMR) of $910 (for ZIP 57751 in fiscal year 2024) cover the mortgage on a $526,789 home?
The FMR of $910 does not cover the mortgage on a $526,789 home, even when considering an average interest rate. For instance, a 30-year fixed-rate mortgage at a 4% interest rate would require monthly payments exceeding $2,500. This clearly shows that the FMR is insufficient to cover such high mortgage costs. Therefore, it's crucial to look at other factors like property value appreciation or rental income from non-Section 8 sources to balance out the financials.
Objection 2: Is there enough renter demand at 14.4%?
The percentage of renters in ZIP 57751 stands at 14.4%, which is relatively low compared to many urban areas. However, this does not necessarily indicate a lack of demand for rental properties. The local economy and housing market must be considered. With a population of around 1,300, the number of potential renters is limited, but the demand for affordable housing remains consistent. The key here is understanding the specific needs of the local community and whether they align with the type of rental units being offered.
Objection 3: Will vouchers keep pace with $600 market rents?
The average market rent in ZIP 57751 is $600, while the voucher payment is set at the FMR level of $910. This means that vouchers will indeed cover the market rent, leaving a buffer for landlords. However, the challenge lies in ensuring that the voucher program has sufficient funding and that the administrative processes do not become overly burdensome. It's important to monitor the local HUD office's performance and the efficiency of voucher distribution to gauge future stability.
In summary, while the FMR may not cover the mortgage on a high-value home, the local demand for rental properties and the adequacy of voucher payments present opportunities. Landlords and investors should focus on properties that align with the FMR and understand the nuances of the local rental market and administrative requirements of the voucher system.
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.