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 | $1,220 |
| 1 Bedroom | $1,220 |
| 2 Bedrooms | $1,400 |
| 3 Bedrooms | $1,940 |
| 4 Bedrooms | $2,340 |
| 5 Bedrooms | $2,714 |
| 6 Bedrooms | $3,040 |
| 7 Bedrooms | $3,283 |
| 8 Bedrooms | $3,447 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,400 | $402,081 | 0.35% | F |
| 3BR | $1,940 | $488,208 | 0.4% | F |
| 4BR | $2,340 | $569,800 | 0.41% | F |
| 5BR | $2,714 | $618,596 | 0.44% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 84651 in Payson, UT, reveals an interesting investment landscape. For a two-bedroom property, the Fair Market Rent (FMR) for fiscal year 2024 is set at $1,300 per month. This translates to an annual rental income of $15,600. When compared to the median home value of $518,335, the implied gross yield is approximately 3%. This calculation is based on the formula for gross yield: (Annual Rental Income / Property Value) * 100.
In contrast, the Zillow Observed Rent Index (ZORI) indicates a market rent of $1,572 per month for similar properties. This equates to an annual rental income of $18,864, resulting in a gross yield of about 3.6%. This higher gross yield reflects the potential for achieving market rates through non-subsidized tenancy.
Evaluating the two scenarios, the market rent scenario appears more realistic given the context of Payson's rental market. The renter density of 15.0% suggests that there is a moderate level of demand for rental properties, which supports the possibility of securing tenants willing to pay market rates. Additionally, the days on market (DOM) figure of 51 days indicates that properties are generally rented out relatively quickly, further supporting the likelihood of achieving market rents.
However, it is important to consider the specifics of the Section 8 program. While the FMR-based gross yield of 3% might seem lower, it provides stable, government-backed income, which can be particularly attractive for risk-averse investors. The choice between these two gross yields should be made considering the investor's risk tolerance and the specific dynamics of the local housing market.
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.