Location: Topeka, KS | Metro: Topeka, KS MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $720 |
| 1 Bedroom | $750 |
| 2 Bedrooms | $960 |
| 3 Bedrooms | $1,280 |
| 4 Bedrooms | $1,300 |
| 5 Bedrooms | $1,508 |
| 6 Bedrooms | $1,689 |
| 7 Bedrooms | $1,824 |
| 8 Bedrooms | $1,915 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap-rate scenario for ZIP code 66603 reveals a nuanced picture that landlords and small-portfolio investors should consider when evaluating potential investments. The Fair Market Rent (FMR) for a 2-bedroom apartment in this ZIP code for fiscal year 2024 is set at $880 per month. This translates into an annualized income of $10,560 if a property owner were to participate in the Section 8 program.
In contrast, the market rent for a similar 2-bedroom unit, based on Census ACS data, stands at $698 per month, which annualizes to $8,376. Given the median home value in ZIP 66603 is $72,754, the implied gross yield for a Section 8 property would be approximately 14.5%, calculated by dividing the annualized FMR income by the median home value. For a market-rent property, the gross yield drops to about 11.5% under the same calculation method.
The higher gross yield in the Section 8 scenario might initially seem attractive, but it's important to contextualize this within the broader rental market dynamics of ZIP 66603. With a renter density of 70.9%, there is a significant demand for rental properties, suggesting that market rents could potentially be higher than the reported $698 per month. However, the lack of data on days-on-market (DOM) makes it challenging to assess how quickly properties can be leased at market rates versus through the Section 8 program.
The Section 8 program provides a guaranteed source of income, albeit subject to government regulations and funding. While the gross yield appears favorable, the reality of running a Section 8 property involves understanding the intricacies of the program, including tenant selection criteria and maintenance standards.
Given the high renter density, landlords might find that market-rent properties offer a balance between higher yields and less administrative complexity compared to Section 8 properties. However, the decision ultimately hinges on individual investment strategies and risk tolerance levels.
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.