Location: Salinas, CA | Metro: Salinas, 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 | $2,600 |
| 1 Bedroom | $2,670 |
| 2 Bedrooms | $3,210 |
| 3 Bedrooms | $4,320 |
| 4 Bedrooms | $4,710 |
| 5 Bedrooms | $5,464 |
| 6 Bedrooms | $6,120 |
| 7 Bedrooms | $6,610 |
| 8 Bedrooms | $6,941 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 1BR | $2,670 | $915,151 | 0.29% | F |
| 2BR | $3,210 | $1,203,942 | 0.27% | F |
| 3BR | $4,320 | $1,489,176 | 0.29% | F |
| 4BR | $4,710 | $1,858,717 | 0.25% | F |
| 5BR | $5,464 | $2,341,407 | 0.23% | F |
U.S. Census Bureau data (2024)
The Section 8 cap-rate analysis for ZIP code 93950, Pacific Grove, CA, reveals a significant disparity between the federal market rent (FMR) and the actual market rent, impacting potential investment yields.
Annualizing the Federal Housing Administration's Fair Market Rent (FMR) for a two-bedroom unit at $3770 for fiscal year 2024, the implied gross yield is approximately 0.27%. This is calculated by taking the annualized rent ($3770 * 12 = $45,240) and dividing it by the median home value ($1,403,939). The formula for gross yield is thus:
$45,240 / $1,403,939 = 0.0322 or 0.27%
In contrast, using the Zillow Observed Rent Index (ZORI) for the same unit at $3,080 per month, the implied gross yield drops even lower to about 0.22%. This calculation follows the same logic:
$3,080 * 12 = $36,960 annualized market rent
$36,960 / $1,403,939 = 0.0263 or 0.22%
Given the 49.6% renter density in Pacific Grove, the ZORI-based gross yield is more reflective of the current rental market conditions. However, the lack of data on days on market (DOM) means that we cannot fully assess how quickly properties might be rented out under Section 8 versus the general market. Despite this, the lower gross yields suggest that Section 8 properties in this area would likely offer a much smaller return compared to market-rate rentals.
The FMR scenario assumes a higher monthly rent payment from the government, but the gross yield still remains extremely low due to the high median home value in Pacific Grove. This makes it clear that while Section 8 can provide stable income, it is not a lucrative option for maximizing returns on real estate investments in this ZIP code.
For small-portfolio investors looking to maximize their returns, market-rate rentals may be a better choice despite the slightly lower renter density. However, for those seeking a guaranteed tenant through the Section 8 program, the trade-off is a significantly reduced gross yield. Investors should weigh these factors carefully when considering their investment strategy in Pacific Grove.
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.