Location: Colorado Springs, CO | Metro: Colorado Springs, CO HUD Metro FMR Area
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 | $1,070 |
| 1 Bedroom | $1,310 |
| 2 Bedrooms | $1,540 |
| 3 Bedrooms | $2,130 |
| 4 Bedrooms | $2,450 |
| 5 Bedrooms | $2,842 |
| 6 Bedrooms | $3,183 |
| 7 Bedrooms | $3,438 |
| 8 Bedrooms | $3,610 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $1,310 | $250,210 | 0.52% | F |
| 2BR | $1,540 | $333,063 | 0.46% | F |
| 3BR | $2,130 | $418,183 | 0.51% | F |
| 4BR | $2,450 | $514,375 | 0.48% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 80903 in Colorado Springs, CO, provides insight into potential investment opportunities for landlords and small-portfolio investors. To derive the cap rate, we must first calculate the gross yield based on the Federal Market Rent (FMR) and the Zillow Observed Rent Index (ZORI).
The annualized 2BR FMR for FY 2024 is $1500 per month, equating to an annual rental income of $18,000. The ZORI for a 2BR unit is $1,752 per month, resulting in an annual rental income of $21,024. Given the median home value in ZIP 80903 is $378,860, the implied gross yield for the FMR scenario is approximately 4.75%, while the ZORI scenario yields about 5.55%.
To determine which scenario is more realistic, consider the local rental market conditions. With a renter density of 60.7%, there is a significant demand for rental properties in Colorado Springs. However, the N/A-day DOM (Days On Market) suggests that the data on how quickly properties are rented might be incomplete or unavailable, making it challenging to predict the exact vacancy rates and thus the net operating income (NOI).
Despite this, the ZORI scenario with a gross yield of 5.55% is more likely to reflect the current market conditions accurately. This higher yield aligns better with the observed rent index, indicating that market rents are generally higher than the FMR. Landlords should note that while the FMR scenario offers a lower gross yield of 4.75%, it still represents a stable income source due to the government-backed Section 8 program, albeit at a less profitable rate compared to market rents.
In conclusion, the gross yield derived from the ZORI ($1,752 per month) is more indicative of the potential returns in ZIP 80903. It stands at 5.55%, offering a higher profitability margin for investors willing to navigate the nuances of the local rental market. The FMR scenario, with its 4.75% gross yield, remains a viable option for those seeking a more secure, though less lucrative, rental income stream.
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.