Location: Eddy County, NM | Metro: Eddy County, NM
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 | $1,080 |
| 1 Bedroom | $1,180 |
| 2 Bedrooms | $1,280 |
| 3 Bedrooms | $1,770 |
| 4 Bedrooms | $1,900 |
| 5 Bedrooms | $2,204 |
| 6 Bedrooms | $2,468 |
| 7 Bedrooms | $2,665 |
| 8 Bedrooms | $2,798 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $1,280 | $192,522 | 0.66% | D |
| 3BR | $1,770 | $291,896 | 0.61% | D |
| 4BR | $1,900 | $413,127 | 0.46% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 88220, located in Carlsbad, NM, provides a detailed look at the potential returns for landlords and small-portfolio investors. The Fair Market Rent (FMR) for a two-bedroom apartment in the metro area for fiscal year 2026 is set at $1,230 per month. When annualized, this figure translates to an annual rental income of $14,760. In contrast, the Zillow Observed Rental Index (ZORI) indicates a market rent of $1,578 per month, or $18,936 annually.
To derive the gross yield, we use the median home value of $251,237 as the investment basis. For the Section 8 scenario, the gross yield is calculated as follows:
Given the 26.0% renter density and the 31-day days-on-market (DOM), it's important to consider which yield is more likely to be realized. The lower renter density suggests that there may be fewer potential tenants, which could affect the ability to maintain occupancy at market rates. Additionally, the higher DOM indicates a slower rental market, possibly due to competition or economic factors.
In light of these conditions, the Section 8 gross yield of 5.87% appears more realistic. While it offers a lower return compared to the market rent scenario, it provides greater stability and predictability, which can be crucial for landlords and investors looking to manage their portfolios effectively. The market rent scenario, while offering a higher gross yield of 7.54%, comes with greater risk and uncertainty regarding occupancy and tenant turnover.
Therefore, for ZIP 88220, a landlord or investor should expect a gross yield closer to 5.87% when participating in the Section 8 program, rather than the higher market rent yield of 7.54%. This assessment takes into account the local rental market dynamics and the benefits of long-term, government-backed leases.
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.