Location: Mercer County, ND | Metro: Bismarck, ND MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $880 |
| 1 Bedroom | $930 |
| 2 Bedrooms | $1,090 |
| 3 Bedrooms | $1,480 |
| 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 analysis of the Section 8 cap-rate scenario for ZIP code 58571 reveals several key points that are crucial for landlords and small-portfolio investors.
First, let's consider the Federal Market Rent (FMR) for a two-bedroom apartment, which is set at $860 per month for fiscal year 2024. To annualize this figure, we multiply it by 12, yielding an annual rental income of $10,320 per unit. Given the median home value is not available, we cannot directly calculate a gross yield based on property value. However, we can infer that the gross yield would be lower than typical market yields due to the government-set rates being generally below market levels.
In the absence of specific market rent data, we must rely on broader market trends and the known FMR to estimate the potential cap rate. The 6.9% renter density indicates a relatively low proportion of renters in ZIP 58571, which might suggest a less competitive rental market. This could mean that market rents are either stable or slightly above the FMR, depending on local conditions.
The Days on Market (DOM) data is also not available, which is critical for understanding how quickly properties can be leased. Without this information, we cannot provide a precise gross yield comparison between Section 8 and market rents. However, assuming a reasonable DOM period and considering the renter density, it is likely that Section 8 properties will have a steady occupancy rate but at a lower rental income compared to market rates.
To illustrate the gross yield difference, if we hypothetically assume a median home value in the range where similar properties in the area might fall, say around $200,000, the gross yield from the FMR would be approximately 5.16%. This is calculated by dividing the annualized FMR ($10,320) by the median home value ($200,000).
A more accurate gross yield for market rents would require specific market rent figures, but given the lower renter density, it is reasonable to expect that market rents would provide a higher gross yield than the Section 8 scenario. For example, if market rents were 20% higher than the FMR, the gross yield would be about 6.19%, still lower than typical market yields but more attractive than the Section 8 rate.
Based on the 6.9% renter density, it is evident that the demand for rental properties, including those participating in the Section 8 program, is relatively low. This suggests that while the FMR provides a predictable and stable income source, the overall attractiveness of the investment may be limited by the lower gross yield.
In conclusion, the Section 8 cap-rate for ZIP 58571 implies a gross yield of around 5.16% based on our hypothetical median home value. This is lower than what market rents might offer, though the exact comparison requires current market rent data. Investors should weigh the stability and predictability of Section 8 income against the potentially higher yields from market rents.
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.