Section 8 Fair Market Rent (FMR) for ZIP 85942 - 2027

FY 2027 Fair Market Rent Rates

The Section 8 cap rate analysis for ZIP code 85942 presents a unique challenge due to the lack of specific market data. However, using the available Fair Market Rent (FMR) data for a 2-bedroom unit at $1,310 per month (annualized at $15,720 for FY 2026), we can derive some insights into potential investment returns.

Given that the median home value for ZIP 85942 is not provided, we cannot calculate an exact cap rate. Nevertheless, we can still assess the gross yield, which is the annual rental income divided by the property's purchase price. Assuming a median home value for context, let's consider two scenarios based on the FMR and a hypothetical market rent figure.

In the first scenario, if we were to use the FMR of $1,310 per month for a 2-bedroom unit, the annualized rent would be $15,720. This represents the maximum allowable rent for Section 8 participants in this area. If the median home value were hypothetically $300,000, the implied gross yield would be approximately 5.24%. This calculation is derived by dividing the annual rent ($15,720) by the median home value ($300,000).

In the second scenario, where market rent is not available, we must rely on the FMR to gauge potential investment performance. With a higher median home value, say $400,000, the gross yield would drop to about 3.93%. This lower yield reflects the reduced rental income relative to the increased property value.

The gross yield comparison between these two scenarios highlights the importance of property valuation in determining investment attractiveness. A gross yield of 5.24% is more favorable compared to 3.93%, indicating that a lower property value can enhance the overall return on investment when using FMR as the basis for rental income.

However, the decision on which scenario is more realistic depends on the local real estate market conditions. Given the lack of specific renter density and days on market (DOM) figures, it's challenging to pinpoint the most likely outcome. Typically, a higher renter density and shorter DOM suggest a more robust rental market, potentially justifying higher property values and thus lower gross yields.

To conclude, while the exact cap rate remains undefined without complete data, the gross yield offers a useful starting point for evaluating investment opportunities in ZIP 85942. Investors should consider these figures alongside other market indicators to make informed decisions.

Data Sources: FMR data from HUD (2027).

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.