Location: San Diego-Chula Vista-Carlsbad, CA | Metro: San Diego-Chula Vista-Carlsbad, CA 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 | $2,520 |
| 1 Bedroom | $2,690 |
| 2 Bedrooms | $3,250 |
| 3 Bedrooms | $4,310 |
| 4 Bedrooms | $5,210 |
| 5 Bedrooms | $6,044 |
| 6 Bedrooms | $6,769 |
| 7 Bedrooms | $7,311 |
| 8 Bedrooms | $7,677 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,690 | $718,119 | 0.37% | F |
| 2BR | $3,250 | $1,064,279 | 0.31% | F |
| 3BR | $4,310 | $1,595,218 | 0.27% | F |
| 4BR | $5,210 | $1,801,605 | 0.29% | F |
| 5BR | $6,044 | $2,236,239 | 0.27% | F |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP 92008 (Carlsbad, CA) provides a clear snapshot of the investment potential in this area. For a two-bedroom unit, the Fair Market Rent (FMR) set by HUD for FY 2024 is $3,130 annually, while the market rent, as indicated by Zillow's ZORI index, stands at $3,070 annually.
To calculate the implied gross yield for both scenarios, we first need to annualize the rental income. The FMR scenario yields an annual income of $37,560 ($3,130 x 12 months), whereas the market rent scenario results in an annual income of $36,840 ($3,070 x 12 months).
Given the median home value in Carlsbad, CA, is $1,309,728, the implied gross yield under the FMR scenario is approximately 2.87%. This is calculated by dividing the annual income ($37,560) by the median home value ($1,309,728). In contrast, the gross yield based on market rent is slightly lower at 2.82%, derived from the annual income ($36,840) divided by the median home value ($1,309,728).
The difference between these yields is minimal, but it does reflect the slightly higher rental income that can be expected through the Section 8 program compared to market rates. However, the reality of the situation is more nuanced. With a renter density of 51.8%, it is evident that Carlsbad has a significant proportion of renters, which supports the viability of both rental scenarios.
The lack of data regarding days on market (DOM) suggests that there is either a scarcity of listings or that the rental market is highly competitive, leading to quick tenancies. Given the high median home value and the relatively low rent figures, the gross yield might seem unattractive at first glance. However, it is important to note that these figures represent the gross yield before expenses, which include property management fees, maintenance costs, insurance, and other operational expenses.
In conclusion, while the implied gross yield under the FMR scenario is marginally higher at 2.87% compared to the market rent scenario at 2.82%, the actual net operating income (NOI) will depend on the specific expenses associated with each property. Investors should use these gross yields as a starting point for their own detailed calculations, considering the local rental market dynamics and the cost structure of individual properties.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). 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.