Location: St. Louis, MO | Metro: St. Louis, MO-IL HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $840 |
| 1 Bedroom | $880 |
| 2 Bedrooms | $1,070 |
| 3 Bedrooms | $1,370 |
| 4 Bedrooms | $1,580 |
| 5 Bedrooms | $1,833 |
| 6 Bedrooms | $2,053 |
| 7 Bedrooms | $2,217 |
| 8 Bedrooms | $2,328 |
U.S. Census Bureau data (2024)
The analysis for ZIP code 63387 reveals a nuanced picture when considering the potential for Section 8 properties. The Fair Market Rent (FMR) for a two-bedroom unit in this area for fiscal year 2024 is set at $930 per month. Annualizing this figure yields a yearly rental income of $11,160. In contrast, the market rent for a similar unit stands at $1,125 monthly, translating into an annual rental income of $13,500.
To understand the implications on gross yield, we need to consider these figures in relation to property values. However, the median home value for ZIP 63387 is currently not available, making it challenging to provide a precise cap rate. Nonetheless, we can infer that the gross yield based on the FMR would be lower compared to the gross yield derived from market rent rates. Specifically, if we hypothetically assume a property value, the gross yield using the FMR would be calculated as $11,160 divided by the property value, while the gross yield using market rent would be $13,500 divided by the same property value.
Given the 24.1% renter density in ZIP 63387, it's important to note that the number of days on the market (DOM) is also not available, which could impact the speed at which properties are rented out and the overall occupancy rates. Despite this missing data point, the higher gross yield associated with market rents suggests a more favorable scenario for landlords and small-portfolio investors looking to maximize returns. This is because market rents better reflect the current demand and willingness to pay among renters in the area, even though Section 8 rates offer stability and guaranteed income.
In conclusion, while the exact cap rate cannot be determined due to the lack of median home value data, the gross yield comparison clearly shows that renting at market rates ($1,125 per month) provides a higher return on investment compared to renting at the FMR ($930 per month). Landlords should weigh the benefits of higher gross yields against the advantages of Section 8 tenancy, such as reduced risk of non-payment and the broader social mission of providing affordable housing. For those prioritizing financial returns, the market rent scenario presents a more realistic opportunity to achieve higher gross yields.
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.