Location: Peoria, IL | Metro: Bloomington, IL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $840 |
| 1 Bedroom | $900 |
| 2 Bedrooms | $1,180 |
| 3 Bedrooms | $1,550 |
| 4 Bedrooms | $1,560 |
| 5 Bedrooms | $1,810 |
| 6 Bedrooms | $2,027 |
| 7 Bedrooms | $2,189 |
| 8 Bedrooms | $2,298 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 61748 reveals a clear picture when comparing the Federal Market Rent (FMR) and the market rent against the median home value. The annualized FMR for a 2-bedroom unit in ZIP 61748 for FY 2024 is $890, while the Census ACS reported market rent for the same type of unit is $780.
To calculate the gross yield, we use the median home value of $301,519. For the FMR scenario, the annualized rental income would be $10,680 ($890 x 12 months), resulting in a gross yield of approximately 3.5%. In contrast, using the market rent figure of $780 per month, the annual rental income would be $9,360, leading to a gross yield of about 3.1%.
The difference between these two yields is significant for investors. The FMR-based gross yield of 3.5% is higher than the market rent-based gross yield of 3.1%, indicating that properties rented under Section 8 could potentially offer better returns compared to the general market. However, the actual feasibility of achieving these yields depends on several factors, including the density of renters and the typical days on market (DOM).
In ZIP 61748, the renter density is stated at 3.3%, which suggests that the pool of potential tenants might be smaller. This lower tenant density could make it challenging to consistently achieve the higher FMR-based rents, especially if there's competition for tenants or if the DOM is high. Since the DOM is listed as N/A, we cannot accurately assess how quickly properties are typically leased in this area, but it's important to consider that a longer DOM can affect the overall profitability and cash flow of a property.
Given the data, the FMR-based gross yield of 3.5% is theoretically more attractive, but the actual market conditions and the specific challenges of finding and retaining tenants in ZIP 61748 should be carefully considered. The 3.1% gross yield based on market rent is a more conservative estimate and likely represents a more realistic scenario for most investors, considering the limited number of renters and the potential difficulties in leasing properties promptly.
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.