Location: New Orleans-Metairie, LA | Metro: New Orleans-Metairie, LA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,060 |
| 1 Bedroom | $1,190 |
| 2 Bedrooms | $1,430 |
| 3 Bedrooms | $1,840 |
| 4 Bedrooms | $2,160 |
| 5 Bedrooms | $2,506 |
| 6 Bedrooms | $2,807 |
| 7 Bedrooms | $3,032 |
| 8 Bedrooms | $3,184 |
The analysis of the Section 8 cap-rate picture for ZIP code 70033 in Unknown, Louisiana, reveals some critical insights for landlords and small-portfolio investors.
The Fair Market Rent (FMR) for a two-bedroom apartment in ZIP 70033 for fiscal year 2024 is set at $1310 per month. This translates into an annual rental income of $15,720 when considering a full-year lease without any vacancy. However, the median home value in this area is currently unavailable, making it difficult to calculate a precise gross yield based on property values. Additionally, the exact market rent for properties in this ZIP code is also not available, further complicating a direct comparison.
To derive a rough cap-rate picture, we must first define the gross yield. In the case of Section 8, the gross yield would be the annual rental income divided by the purchase price or value of the property. Given the lack of specific median home values, we cannot provide an exact gross yield figure for the Section 8 scenario. Nonetheless, we can compare the potential yields against what would be expected if market rents were known.
The implied gross yield for the Section 8 scenario can be estimated using the FMR. If we assume that the median home value is significantly higher than the annual rental income of $15,720, the gross yield would be relatively low. For example, if the median home value were around $200,000, the gross yield would be approximately 7.86%. This is calculated by dividing the annual rental income ($15,720) by the property value ($200,000).
In contrast, the market rent scenario presents a challenge due to the unavailability of specific data. Without knowing the market rent, we cannot accurately determine the gross yield. However, it is reasonable to infer that market rents could potentially offer a higher gross yield than the Section 8 program, especially if the market rent exceeds the FMR. The actual difference would depend on the market rent and the median home value, both of which are currently unknown.
Given the unavailability of key metrics such as renter density and days on market (DOM), it's challenging to definitively state which scenario is more realistic. However, the low gross yield associated with the Section 8 program suggests that it might be less attractive compared to market rents, assuming the latter are indeed higher. Landlords and small-portfolio investors should consider these factors carefully before deciding whether to participate in the Section 8 program or aim for market rents.
In summary, while the Section 8 program provides a stable source of income, the implied gross yield based on the FMR of $1310 for a two-bedroom apartment is likely lower than what could be achieved through market rents. The decision to participate in Section 8 should be made after evaluating the specific financial needs and risk tolerance of the investor.
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.