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 | $1,530 |
| 1 Bedroom | $1,620 |
| 2 Bedrooms | $1,920 |
| 3 Bedrooms | $2,420 |
| 4 Bedrooms | $2,840 |
| 5 Bedrooms | $3,294 |
| 6 Bedrooms | $3,689 |
| 7 Bedrooms | $3,984 |
| 8 Bedrooms | $4,183 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,920 | $257,577 | 0.75% | D |
| 3BR | $2,420 | $424,943 | 0.57% | F |
| 4BR | $2,840 | $811,724 | 0.35% | F |
| 5BR | $3,294 | $1,050,480 | 0.31% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 78750 in Austin, TX, reveals interesting insights into potential investment opportunities. To begin with, let's consider the Fair Market Rent (FMR) for a 2-bedroom apartment, which is set at $2190 annually for the fiscal year 2024. This translates to a monthly rent of approximately $182.50. Given the median home value of $601,805, the implied gross yield for a Section 8 property would be about 3.65%. This is calculated by taking the annualized rental income ($2190) and dividing it by the median home value ($601,805).
On the other hand, if we look at the market rent, represented by the Zillow Observed Rent Index (ZORI), which stands at $1,488 per month, the annualized rental income would be $17,856. Using the same median home value, the implied gross yield for a market-rent property would be approximately 2.97%. This is derived by dividing the annualized market rent ($17,856) by the median home value ($601,805).
The gross yield comparison indicates that a Section 8 property in ZIP 78750 offers a higher return on investment compared to a market-rent property. However, the decision between these two options should also take into account the renter density and the days on market (DOM) figures. With a renter density of 35.1%, it's evident that a significant portion of the population in this area is looking for rental properties, which could benefit both types of investments.
The N/A-day DOM suggests that there is either insufficient data or a high demand for rentals, leading to quick tenancy. In such a scenario, the stability and guaranteed income from Section 8 tenants might be more appealing despite the lower rent rates. This is because Section 8 provides a steady stream of income with minimal risk of vacancy, which can be crucial for small-portfolio investors who need predictable cash flows.
In conclusion, while the market rent scenario offers a slightly lower gross yield, the higher renter density and potentially shorter DOM indicate a strong rental market. For investors seeking stability and long-term returns, the Section 8 option with an implied gross yield of 3.65% is more realistic and beneficial. The higher yield from Section 8 properties makes them a compelling choice, especially considering the financial guarantees they provide.
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.