Location: Chicago-Joliet-Naperville, IL | Metro: Chicago-Joliet-Naperville, IL HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,390 |
| 1 Bedroom | $1,470 |
| 2 Bedrooms | $1,660 |
| 3 Bedrooms | $2,130 |
| 4 Bedrooms | $2,440 |
| 5 Bedrooms | $2,830 |
| 6 Bedrooms | $3,170 |
| 7 Bedrooms | $3,424 |
| 8 Bedrooms | $3,595 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 60081, Spring Grove, IL, reveals interesting insights into the potential returns for landlords and small-portfolio investors. To derive the cap rate, we need to compare the Federal Market Rent (FMR) and the market rent against the median home value.
First, let's annualize the two-bedroom FMR at $1740 for FY 2024. This figure represents the total annual income from a Section 8 voucher tenant. Given the median home value in Spring Grove is $406,467, the implied gross yield from a Section 8 tenant would be approximately 0.43%. This is calculated by dividing the annualized FMR ($1740) by the median home value ($406,467).
Next, consider the market rent at $1,201 per month, derived from Census ACS data. Annualizing this market rent yields an annual income of $14,412. When compared to the median home value, the implied gross yield from market rent is about 3.55%, calculated by dividing the annualized market rent ($14,412) by the median home value ($406,467).
The stark difference between these two gross yields highlights the financial impact of choosing to participate in the Section 8 program versus renting at market rates. While the Section 8 gross yield is significantly lower at 0.43%, the market rent gross yield is notably higher at 3.55%.
Given the 7.0% renter density in Spring Grove, it is important to note that the number of potential Section 8 tenants is limited. Additionally, the N/A-day Days on Market (DOM) suggests that homes are either selling quickly or that there is insufficient data to provide a reliable DOM figure. This could indicate a strong local real estate market, making it less likely for landlords to prefer the lower yields associated with Section 8 tenants.
In conclusion, while the Section 8 gross yield at 0.43% provides a clear benchmark, the more realistic scenario for most landlords and small-portfolio investors is the market rent gross yield of 3.55%. This higher yield aligns better with the overall rental environment and the limited pool of Section 8 participants in Spring Grove.
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.