Location: Austin-Round Rock-San Marcos, TX | Metro: Austin-Round Rock-San Marcos, TX MSA
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,590 |
| 1 Bedroom | $1,680 |
| 2 Bedrooms | $2,000 |
| 3 Bedrooms | $2,520 |
| 4 Bedrooms | $2,960 |
| 5 Bedrooms | $3,434 |
| 6 Bedrooms | $3,846 |
| 7 Bedrooms | $4,154 |
| 8 Bedrooms | $4,362 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $2,000 | $311,606 | 0.64% | D |
| 3BR | $2,520 | $497,312 | 0.51% | F |
| 4BR | $2,960 | $719,014 | 0.41% | F |
| 5BR | $3,434 | $1,032,001 | 0.33% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 78736 in Austin, TX, provides a clear picture of potential returns for landlords and small-portfolio investors. The Fair Market Rent (FMR) for a 2-bedroom apartment in fiscal year 2024 is set at $2240 annually. When compared to the median home value of $594,462, this annual rent translates into an implied gross yield of approximately 0.38%. This calculation is derived by dividing the annual FMR by the median home value.
On the other hand, the market rent for a 2-bedroom apartment, as indicated by the Zillow Observed Rent Index (ZORI), stands at $1,388 per month, or $16,656 annually. Using the same median home value, this market rent scenario yields a gross return of about 2.80%. This higher gross yield reflects the premium that market rents can command over government-set rates.
Given the 34.0% renter density in ZIP 78736, it is important to consider the likelihood of finding tenants willing to pay market rates versus those who might be seeking assistance through Section 8 vouchers. While the exact Days on Market (DOM) is not available, the high renter density suggests a robust rental market, which typically supports higher market rents. However, the presence of Section 8 voucher holders cannot be overlooked, especially in a city like Austin where affordable housing options are increasingly sought after.
The disparity between the two gross yields—0.38% for FMR and 2.80% for ZORI—highlights the significant impact that rental source can have on an investor's bottom line. While the FMR scenario represents a more conservative estimate, it is also a more stable and predictable income stream. Conversely, the ZORI scenario offers a much higher gross yield, but comes with greater risk due to the volatility of market rents and the challenge of maintaining occupancy levels.
In conclusion, for ZIP 78736, the gross yield from renting to Section 8 participants is approximately 0.38%, while renting at market rates could achieve a gross yield of around 2.80%. The decision on which scenario is more realistic should factor in the local rental dynamics and the investor's risk tolerance. Given the strong rental market and high renter density, market rents are likely to be more prevalent, though Section 8 remains a viable option for stability.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.