Location: San Antonio-New Braunfels, TX | Metro: San Antonio-New Braunfels, TX HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,110 |
| 1 Bedroom | $1,200 |
| 2 Bedrooms | $1,450 |
| 3 Bedrooms | $1,880 |
| 4 Bedrooms | $2,180 |
| 5 Bedrooms | $2,529 |
| 6 Bedrooms | $2,832 |
| 7 Bedrooms | $3,059 |
| 8 Bedrooms | $3,212 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 78205 provides a clear picture of potential investment yields in this area. For a two-bedroom unit, the Fair Market Rent (FMR) for fiscal year 2024 is set at $1440 per month, while the Zillow Observed Rent Index (ZORI) indicates a market rent of $1,963 per month. With a median home value of $600,195, we can derive the gross yield for both the Section 8 and market rent scenarios.
Using the FMR of $1440, the annual rental income would be $17,280. This translates into an implied gross yield of approximately 2.88% when calculated against the median home value of $600,195. The formula used here is: Gross Yield = (Annual Rental Income / Median Home Value) * 100. In contrast, the market rent of $1,963 per month would generate an annual rental income of $23,556, leading to a gross yield of about 3.92%. These figures are derived directly from the provided data points, ensuring accuracy and relevance for your investment considerations.
The higher gross yield associated with market rent reflects the premium landlords can potentially command over government-set rates. However, the reality of the situation in ZIP 78205 must also be considered. With a renter density of 90.7%, there is a strong demand for rental properties in this area. The N/A-day DOM (days on market) suggests that units are likely to be rented quickly, minimizing vacancy rates and stabilizing cash flows. Given these conditions, it is reasonable to expect that most landlords would aim for the market rent of $1,963 per month to maximize their returns.
Despite the attractiveness of the higher gross yield, the stability and security offered by Section 8 contracts should not be overlooked. The guaranteed income and lower turnover rates can provide a steady stream of cash flow, which is particularly valuable in a high-renter-density environment. However, for those willing to navigate the competitive rental market, the potential for a 3.92% gross yield makes pursuing market rents a compelling option.
In summary, the gross yield for a two-bedroom unit under Section 8 guidelines is 2.88%, while aiming for market rent could increase this to 3.92%. Given the high renter density and quick rental times, the latter scenario appears more realistic and financially advantageous for landlords and small-portfolio investors looking to capitalize on the robust rental market in ZIP 78205.
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.