Location: Mercer County, ND | Metro: Bismarck, ND MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,050 |
| 1 Bedroom | $1,050 |
| 2 Bedrooms | $1,380 |
| 3 Bedrooms | $1,800 |
| 4 Bedrooms | $1,820 |
| 5 Bedrooms | $2,111 |
| 6 Bedrooms | $2,364 |
| 7 Bedrooms | $2,553 |
| 8 Bedrooms | $2,681 |
U.S. Census Bureau data (2024)
A skeptical investor looking at ZIP code 58523 might raise several concerns regarding the viability of investing in a Section 8 property. Here are three common objections and their answers based on the available data.
Objection 1: Will the Fair Market Rent (FMR) of $860 for ZIP 58523 in fiscal year 2024 be sufficient to cover the mortgage on a $235,472 home?
The FMR of $860 is indeed a critical figure for determining whether a Section 8 investment will be profitable. To calculate if this amount can cover a mortgage, we must consider the interest rate and loan terms. Assuming a standard 30-year fixed-rate mortgage at an average interest rate of 5%, the monthly payment on a $235,472 home would be approximately $1,275. This means that the FMR of $860 falls short by about $415 per month. However, it's important to note that this calculation does not include potential rental income from other units in multi-unit properties, nor does it account for property appreciation over time or tax benefits associated with owning rental property.
Objection 2: Is there enough renter demand at 25.4%?
The 25.4% renter occupancy rate in ZIP 58523 suggests that there is a moderate level of demand for rental properties. While this percentage is not extremely high, it indicates that a quarter of the housing units are rented out. This rate is crucial because it reflects the proportion of residents who are likely to seek rental assistance through programs like Section 8. A higher renter occupancy rate typically signals stronger demand for affordable housing. However, the data does not provide a detailed breakdown of the number of renters seeking Section 8 assistance, so while 25.4% is indicative of some demand, it may not fully address the specific needs of a Section 8 investor.
Objection 3: Will vouchers keep pace with market rents of $1,075?
The market rent of $1,075 is significantly higher than the FMR of $860, which could pose a challenge for landlords relying solely on Section 8 vouchers. The gap between the two figures is $215, meaning landlords would need to subsidize this difference to remain competitive in the rental market. The data does not specify how quickly voucher amounts adjust to changes in market rents, but historically, adjustments have been slow to respond to rapid increases in rental costs. Therefore, landlords should prepare for the possibility of covering part of the rent themselves or finding ways to reduce operating costs to maintain profitability.
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.