Location: Provo-Orem-Lehi, UT | Metro: Provo-Orem-Lehi, UT 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 | $1,160 |
| 1 Bedroom | $1,160 |
| 2 Bedrooms | $1,330 |
| 3 Bedrooms | $1,840 |
| 4 Bedrooms | $2,220 |
| 5 Bedrooms | $2,575 |
| 6 Bedrooms | $2,884 |
| 7 Bedrooms | $3,115 |
| 8 Bedrooms | $3,271 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,330 | $352,638 | 0.38% | F |
| 3BR | $1,840 | $406,994 | 0.45% | F |
| 4BR | $2,220 | $482,938 | 0.46% | F |
| 5BR | $2,575 | $599,172 | 0.43% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 84606 in Provo, UT, reveals some interesting insights into the investment potential of properties in this area. The Fair Market Rent (FMR) for a 2-bedroom apartment in fiscal year 2024 is set at $1,220 per month, while the Zillow Observed Rent Index (ZORI) indicates that the market rent for a similar property is $1,111 per month.
To derive the gross yield, we first annualize these figures. For the FMR scenario, multiplying $1,220 by 12 gives an annual rental income of $14,640. Dividing this by the median home value of $430,213 yields a gross yield of approximately 3.4%. In contrast, the ZORI market rent of $1,111 per month annualizes to $13,332, resulting in a gross yield of roughly 3.1% when compared to the median home value.
The higher gross yield based on FMR suggests a more favorable investment scenario for Section 8 properties, but it's important to consider the local market conditions. With a renter density of 78.2%, there is a strong demand for rental housing in Provo, indicating that the market rent could be closer to the FMR than initially thought. However, the lack of data on days on market (DOM) makes it challenging to predict how quickly a property might be leased at either rate.
In conclusion, while the FMR-based gross yield of 3.4% appears more attractive, the actual performance will depend on factors such as lease-up times and tenant turnover. Given the high renter density, landlords and small-portfolio investors should lean towards the FMR as a more realistic benchmark for assessing the potential returns of Section 8 properties in ZIP 84606.
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.