Location: Limestone County, TX | Metro: Waco, TX HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $920 |
| 1 Bedroom | $1,000 |
| 2 Bedrooms | $1,240 |
| 3 Bedrooms | $1,710 |
| 4 Bedrooms | $1,910 |
| 5 Bedrooms | $2,216 |
| 6 Bedrooms | $2,482 |
| 7 Bedrooms | $2,681 |
| 8 Bedrooms | $2,815 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 76673 provides a clear picture of potential investment yields based on Fair Market Rent (FMR) and market rent figures. For a two-bedroom property, the annualized FMR for fiscal year 2024 is set at $910 per month, while the market rent stands at $1,188 per month according to the latest Census ACS data.
To calculate the implied gross yield, we first need to annualize these figures. The annualized FMR for a two-bedroom unit in ZIP 76673 would be $10,920 ($910 x 12 months), whereas the annualized market rent would amount to $14,256 ($1,188 x 12 months).
The median home value in ZIP 76673 is $265,284. Using this figure, the implied gross yield for a Section 8 rental property is approximately 4.11% ($10,920 / $265,284). In contrast, if the property were rented at market rates, the implied gross yield would be around 5.37% ($14,256 / $265,284).
Given that only 17.1% of households in ZIP 76673 are renters, it's important to consider the limited demand for rental properties in this area. Additionally, the lack of data on days on market (DOM) suggests either a stable rental market or a scarcity of recent transactions, making it difficult to assess how quickly a property might turn over if it becomes vacant.
In light of these factors, the market rent scenario appears more realistic for small-portfolio investors and landlords who can manage tenant selection and maintain higher occupancy rates. However, the Section 8 program offers a more stable income stream, albeit at a lower gross yield, which is particularly appealing for those seeking long-term, predictable cash flows.
While the exact Net Operating Income (NOI) percentages will vary depending on individual property expenses, the difference between the 4.11% and 5.37% gross yields is significant. This implies that investors should carefully weigh the trade-offs between the stability offered by Section 8 versus the potentially higher returns available through market renting.
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.