Location: Los Angeles-Long Beach-Glendale, CA | Metro: Los Angeles-Long Beach-Glendale, CA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,150 |
| 1 Bedroom | $2,400 |
| 2 Bedrooms | $2,960 |
| 3 Bedrooms | $3,760 |
| 4 Bedrooms | $4,200 |
| 5 Bedrooms | $4,872 |
| 6 Bedrooms | $5,457 |
| 7 Bedrooms | $5,894 |
| 8 Bedrooms | $6,189 |
The analysis of the Section 8 cap rate for ZIP code 90510 (Unknown, CA) requires us to work with the limited data available. The Fair Market Rent (FMR) for a 2-bedroom apartment in fiscal year 2024 is set at $2540 annually. However, the median home value and market rent figures are not available, making it challenging to provide a precise cap rate.
To derive a rough picture, let's first consider the scenario where we use the FMR. Assuming a median home value that is typical for the area, we can estimate the implied gross yield. For instance, if we hypothetically take a median home value of $762,000 (based on similar affluent areas), the annual rent at $2540 would result in an implied gross yield of approximately 0.33%. This calculation is based on the formula:
In the absence of market rent data, it's impossible to calculate a second gross yield scenario. Typically, market rents are higher than FMRs, leading to a potentially better gross yield for non-Section 8 properties. Without this figure, we cannot compare the two yields directly.
The lack of specific data on renter density and days on market (DOM) further complicates the analysis. In areas with high renter density and low DOM, landlords might find it easier to fill vacancies and maintain higher occupancy rates, which could improve the overall investment performance. Conversely, low renter density and high DOM could indicate challenges in attracting tenants and maintaining consistent income streams.
Given the incomplete data, the most realistic scenario is likely the one using the FMR, as it represents the guaranteed income stream under the Section 8 program. While the gross yield of 0.33% appears low, it ensures stable and predictable cash flow, which is valuable for risk-averse investors and small-portfolio managers. The hypothetical median home value used here is illustrative; actual values can vary widely, affecting the gross yield.
Investors should consider these factors when deciding whether to participate in the Section 8 program in ZIP 90510. A low gross yield does not necessarily mean poor performance, especially when considering the security of the rental income and the potential for property appreciation in a desirable location.
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.