Location: Rio Arriba County, NM | Metro: Farmington, NM MSA
| Unit Size | Monthly FMR |
|---|---|
| Studio | $840 |
| 1 Bedroom | $850 |
| 2 Bedrooms | $1,080 |
| 3 Bedrooms | $1,490 |
| 4 Bedrooms | $1,640 |
| 5 Bedrooms | $1,902 |
| 6 Bedrooms | $2,130 |
| 7 Bedrooms | $2,300 |
| 8 Bedrooms | $2,415 |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 87037 reveals an interesting picture when comparing the annualized Fair Market Rent (FMR) for a 2-bedroom apartment at $880 per month against the market rent of $525 per month.
First, let's consider the annualized FMR scenario. With a monthly rent of $880, the annual rent would be $10,560. Given that the median home value is not available for this ZIP code, we cannot calculate a precise cap-rate. However, we can infer that the implied gross yield based on the FMR would be higher than the one derived from the market rent. This is because the FMR represents a higher rental income, which is crucial for determining the potential return on investment for properties participating in the Section 8 program.
Next, looking at the market rent scenario of $525 per month, the annual rent comes out to $6,300. Again, without the median home value, we cannot compute a definitive cap-rate. But it's evident that the gross yield from the market rent would be lower compared to the FMR scenario. The difference in gross yields between these two scenarios underscores the financial benefits of participating in the Section 8 program, where the guaranteed rent is closer to the FMR rather than the typical market rate.
Given the 7.7% renter density in ZIP 87037, it suggests that a significant portion of the housing market is not occupied by renters. This low density might indicate that the demand for rental properties is limited, making the market rent scenario more plausible for non-program properties. However, for those interested in Section 8 properties, the higher FMR provides a more accurate projection of potential rental income.
The Days on Market (DOM) being N/A implies there is insufficient data to determine how quickly rental units are typically leased in this area. This could mean that either the market is stable, with consistent tenancy, or there are data gaps that prevent a clear assessment. In either case, the FMR scenario offers a more secure and predictable income stream, especially considering the federal backing of Section 8 payments.
In conclusion, while the exact cap-rate cannot be determined due to the lack of median home value data, the gross yield comparison clearly favors the FMR scenario for Section 8 properties. For non-participating rentals, the market rent provides a realistic basis for expected returns, given the limited rental market presence indicated by the 7.7% renter density.
Data Sources: FMR data from HUD (2027). 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.