Location: Lake Charles, LA | Metro: Lake Charles, LA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $930 |
| 1 Bedroom | $940 |
| 2 Bedrooms | $1,230 |
| 3 Bedrooms | $1,470 |
| 4 Bedrooms | $1,710 |
| 5 Bedrooms | $1,984 |
| 6 Bedrooms | $2,222 |
| 7 Bedrooms | $2,400 |
| 8 Bedrooms | $2,520 |
The analysis for ZIP code 70612 in Unknown, Louisiana, reveals some critical insights into the potential returns for landlords and small-portfolio investors interested in Section 8 properties. With the Fair Market Rent (FMR) for a two-bedroom apartment set at $1080 annually for fiscal year 2024, we can derive a basic understanding of the cap rate scenario.
The Fair Market Rent represents the annualized rental income that a landlord could expect from a Section 8 tenant. However, without the median home value, it's challenging to calculate an exact cap rate. The cap rate is typically calculated by dividing the net operating income (NOI) by the property value. In this case, we'll focus on the gross yield, which is the annual rental income divided by the property value.
Given that the market rent is not available, let's assume a hypothetical market rent to contrast with the Section 8 FMR. If we were to estimate a market rent based on typical values for similar areas, we might consider a figure higher than the FMR, but without specific data, this remains speculative.
In ZIP 70612, the implied gross yield for a Section 8 two-bedroom apartment would be derived from the $1080 annualized FMR. For instance, if the median home value were hypothetically $120,000, the gross yield would be 0.9%. This calculation assumes that the property value is directly comparable to the median home value, which may not always be the case due to differences in property types.
The lack of specific market rent data makes it difficult to provide a precise comparison, but generally, market rents tend to be higher than Section 8 rates. Assuming a market rent of $1200 per month, or $14,400 annually, the gross yield would be significantly higher if the median home value were the same $120,000, at 12%.
However, the actual gross yield will depend on the specific property value, which is currently unknown. Additionally, the investment's feasibility hinges on factors such as renter density and days on market (DOM). With a renter density of N/A%, it's unclear how competitive the demand for rentals is. A higher renter density typically indicates a stronger rental market, potentially favoring market-rate rentals over Section 8 units.
The days on market (DOM) being N/A also leaves us without insight into how quickly properties are leased. Shorter DOM periods suggest a robust rental market where landlords can achieve higher occupancy rates and potentially better returns.
Based on the data provided, the gross yield for Section 8 units appears lower compared to what might be expected from market-rate rentals. Investors should consider the broader economic context and local rental market dynamics when deciding between these options.
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.