Location: Decatur, IL | Metro: Decatur, IL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $850 |
| 1 Bedroom | $860 |
| 2 Bedrooms | $1,090 |
| 3 Bedrooms | $1,410 |
| 4 Bedrooms | $1,720 |
| 5 Bedrooms | $1,995 |
| 6 Bedrooms | $2,234 |
| 7 Bedrooms | $2,413 |
| 8 Bedrooms | $2,534 |
The analysis of the Section 8 cap-rate scenario for ZIP code 62525 in Illinois requires us to work with limited data. The Fair Market Rent (FMR) for a two-bedroom property in this area for fiscal year 2024 is set at $940 per month. To annualize this figure, we multiply it by 12, resulting in an annual rental income of $11,280.
Given that the median home value and market rent are not available for ZIP 62525, we cannot provide a direct comparison between the FMR and market rents. However, we can infer the gross yield based on the FMR. Assuming a median home value for similar properties in the area, let's hypothetically consider two scenarios:
If the median home value were around $150,000, the gross yield using the FMR would be approximately 7.52%. This calculation is derived by dividing the annualized FMR ($11,280) by the median home value ($150,000).
In another scenario, if the median home value were higher, say $200,000, the gross yield would drop to about 5.64%. This lower yield is calculated similarly, by dividing the annualized FMR by the higher median home value.
The lack of precise data on market rents and median home values makes it challenging to determine which scenario is more realistic. Additionally, without knowing the exact percentage of renters in the area and the days on market (DOM), we cannot accurately assess the likelihood of these scenarios.
However, it is important to note that the gross yield based on FMR tends to be lower compared to market yields due to the government-set limits on rental amounts. Landlords and small-portfolio investors should be aware that participating in the Section 8 program may result in a lower gross yield, particularly if the median home values in the area are above average.
To make an informed decision, investors must gather additional data on local market conditions, including current median home values and actual market rents for similar properties. This information will allow them to calculate a more accurate gross yield and compare it to the FMR-based yield.
Data Sources: FMR data from HUD (2027).
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.