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 | $1,470 |
| 1 Bedroom | $1,550 |
| 2 Bedrooms | $1,840 |
| 3 Bedrooms | $2,320 |
| 4 Bedrooms | $2,720 |
| 5 Bedrooms | $3,155 |
| 6 Bedrooms | $3,534 |
| 7 Bedrooms | $3,817 |
| 8 Bedrooms | $4,008 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 3BR | $2,320 | $338,563 | 0.69% | D |
| 4BR | $2,720 | $386,817 | 0.7% | D |
| 5BR | $3,155 | $418,389 | 0.75% | D |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 78754 reveals a significant gap between federally determined Fair Market Rents (FMR) and the actual market rents, impacting potential investment yields.
The annualized 2BR Fair Market Rent set by HUD for FY 2024 in ZIP 78754 is $1870 per month. This translates into an annual income of $22,440. Given the median home value of $363,701, the implied gross yield for a property rented under Section 8 would be approximately 6.17%. This calculation is derived from dividing the annual rental income by the median home value: $22,440 / $363,701 = 0.0617.
In contrast, the market rent for a 2BR property, as indicated by the Zillow Observed Rent Index (ZORI), stands at $1,398 per month. This results in an annual rental income of $16,776. The implied gross yield based on the market rent is significantly lower, at about 4.61%, calculated as $16,776 / $363,701 = 0.0461.
The disparity between these two gross yields highlights the financial realities faced by landlords in ZIP 78754. While the Section 8 rent provides a higher gross yield, it is important to consider the overall rental market dynamics. With a renter density of 45.4%, there is a notable presence of renters in the area, suggesting that the demand for rental properties is substantial. However, the lack of data on days-on-market (DOM) makes it difficult to assess how quickly properties might turn over or the competition faced by landlords.
Given the higher gross yield from Section 8 rentals compared to market rents, it could be more attractive for landlords seeking stable income. However, the decision should also factor in the administrative requirements and limitations associated with participating in the Section 8 program. For small-portfolio investors, the choice may come down to balancing the higher yield with the practicalities of managing a Section 8 property versus a market-rent property.
In conclusion, the gross yield from Section 8 rentals at 6.17% is notably higher than the market rent yield of 4.61%. This suggests that while Section 8 can offer a more lucrative return, the final decision should weigh the benefits against the complexities of the program and the local rental market conditions.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). 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.