Location: Steele County, ND | Metro: Fargo, ND-MN MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $730 |
| 1 Bedroom | $820 |
| 2 Bedrooms | $1,010 |
| 3 Bedrooms | $1,390 |
| 4 Bedrooms | $1,700 |
| 5 Bedrooms | $1,972 |
| 6 Bedrooms | $2,209 |
| 7 Bedrooms | $2,386 |
| 8 Bedrooms | $2,505 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 58064 provides a critical insight into investment potential. To begin, let's consider the Fair Market Rent (FMR) for a 2-bedroom apartment, which is set at $910 per month for FY 2024. When annualized, this figure translates to an annual rental income of $10,920. Given the median home value in the area is $290,217, the implied gross yield for a property rented under the Section 8 program would be approximately 3.76%. This calculation is derived from dividing the annual rental income by the median home value.
In contrast, the market rent for a 2-bedroom apartment is reported at $513 per month according to the Census ACS data. Annualizing this amount gives us an annual rental income of $6,156. Using the same median home value, the implied gross yield based on market rent would be roughly 2.12%. Clearly, the gross yield under the Section 8 program is higher, standing at 3.76%, compared to the market rent scenario at 2.12%.
The decision on which scenario is more realistic hinges on several factors, including the local rental market dynamics and the tenant demand profile. With a renter density of 21.5%, it suggests that a significant portion of the population is inclined towards renting rather than owning. However, the lack of specific data on the days on market (DOM) makes it challenging to gauge the speed at which properties can be leased. Assuming stable demand for affordable housing, the Section 8 scenario presents a more attractive gross yield, indicating a stronger financial return relative to the median home value.
Landlords and small-portfolio investors should weigh these figures carefully against their broader investment goals and risk tolerance. While the Section 8 program offers a higher gross yield, it also comes with its own set of regulations and requirements that must be adhered to, potentially impacting the ease of management and overall investment strategy.
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.