Location: Springfield, IL | Metro: Decatur, IL MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $760 |
| 1 Bedroom | $880 |
| 2 Bedrooms | $1,090 |
| 3 Bedrooms | $1,450 |
| 4 Bedrooms | $1,540 |
| 5 Bedrooms | $1,786 |
| 6 Bedrooms | $2,000 |
| 7 Bedrooms | $2,160 |
| 8 Bedrooms | $2,268 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap rate for ZIP code 62539 reveals a distinct gap between the federal market rent (FMR) and the actual market rent. The annualized FMR for a 2-bedroom apartment in ZIP 62539, based on FY 2024 data, is $930. In contrast, the Census ACS reports the market rent at $663. Given these figures, we can calculate the implied gross yield for both scenarios.
Using the median home value of $136,792 as our investment basis, the gross yield when considering the FMR would be approximately 6.7%. This calculation is derived by dividing the annualized FMR ($930 * 12 months = $11,160) by the median home value ($136,792). On the other hand, if we use the market rent figure of $663, the gross yield drops significantly to about 4.8%. This is calculated by multiplying the market rent ($663 * 12 months = $7,956) and then dividing by the median home value ($136,792).
The lower gross yield using the market rent is more reflective of the actual rental environment in ZIP 62539. With only 12.4% of the population being renters, competition among landlords is likely high, pushing rents closer to the market rate rather than the FMR. Additionally, the lack of data on days on market (DOM) suggests that there might be an oversupply of rental units, further supporting the argument that market rates are the more accurate measure for potential returns.
Landlords and small-portfolio investors should consider the 4.8% gross yield as a more realistic expectation for properties in ZIP 62539 under the Section 8 program. While the FMR-based yield of 6.7% looks appealing, it does not align with the current rental dynamics indicated by the renter density and market conditions.
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.