Location: Little Rock-North Little Rock-Conway, AR | Metro: Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $890 |
| 1 Bedroom | $900 |
| 2 Bedrooms | $1,040 |
| 3 Bedrooms | $1,390 |
| 4 Bedrooms | $1,640 |
| 5 Bedrooms | $1,902 |
| 6 Bedrooms | $2,130 |
| 7 Bedrooms | $2,300 |
| 8 Bedrooms | $2,415 |
U.S. Census Bureau data (2024)
The analysis of the Section 8 cap rate for ZIP code 72016 reveals a detailed picture of potential investment returns. For the purposes of this evaluation, we will consider two primary scenarios: the first based on the Fair Market Rent (FMR) for a 2-bedroom apartment, set at $850 annually for Fiscal Year 2024; and the second using the market rent figure of $913, derived from the Census American Community Survey.
In ZIP 72016, the median home value stands at $235,243. To calculate the gross yield for both scenarios, we divide the annual rental income by the median home value. For the FMR scenario, the annualized rent is $850, resulting in a gross yield of approximately 0.36%. This is calculated by taking $850 and dividing it by $235,243. In the case of market rent at $913, the gross yield increases slightly to about 0.39%, obtained by dividing $913 by $235,243.
The gross yields derived from these calculations suggest that the investment in properties under the Section 8 program in ZIP 72016 would yield modest returns. However, the reality of the situation is influenced by the local rental market dynamics. With a renter density of 22.4%, it indicates that a significant portion of the population is homeowners, which could affect the demand for rental properties, including those in the Section 8 program.
The lack of available data on the number of days on market (DOM) makes it challenging to predict how quickly a property might be rented out under the Section 8 program. Despite this limitation, the market rent scenario provides a slightly higher gross yield compared to the FMR scenario, making it a more optimistic projection for potential returns. However, the actual performance will depend on factors such as the stability of tenant income, maintenance costs, and vacancy rates.
To summarize, the Section 8 cap rate in ZIP 72016, when considering the FMR of $850 and the market rent of $913, implies gross yields of 0.36% and 0.39%, respectively. While the market rent scenario offers a marginally better outlook, investors should carefully evaluate the local market conditions and the specific terms of the Section 8 program before making investment decisions.
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.