Location: San Francisco, CA | Metro: San Francisco, CA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $2,500 |
| 1 Bedroom | $2,920 |
| 2 Bedrooms | $3,590 |
| 3 Bedrooms | $4,690 |
| 4 Bedrooms | $5,280 |
| 5 Bedrooms | $6,125 |
| 6 Bedrooms | $6,860 |
| 7 Bedrooms | $7,409 |
| 8 Bedrooms | $7,779 |
The analysis of the Section 8 cap rate for ZIP code 94966 (Unknown, CA) requires an understanding of the Fair Market Rent (FMR) and the market conditions. For a two-bedroom apartment, the annualized FMR for FY 2024 is set at $3250. However, the market rent for the area is not available, as well as the median home value. This makes it challenging to provide a precise cap rate calculation without additional data.
To derive the gross yield for the Section 8 scenario, we can use the annualized FMR directly. Assuming a property value that reflects typical investment properties in the area, let's consider a hypothetical median home value of $750,000 for illustrative purposes. The gross yield would then be calculated as follows:
$3250 annual rent divided by a $750,000 property value equals a gross yield of approximately 0.43%. This figure is based solely on the Section 8 FMR and does not take into account any potential market rent premiums.
In the absence of market rent data, we cannot calculate a gross yield for a non-Section 8 scenario. Typically, market rents would offer a higher gross yield compared to the FMR, but without specific figures, this remains speculative.
Given the lack of information on renter density and days on market (DOM), it's difficult to determine which scenario is more realistic. However, it's important to note that the Section 8 program offers a stable income stream with government-backed payments, which can be particularly appealing in uncertain economic times or areas with high vacancy rates.
The gross yield comparison between Section 8 and market rents would typically favor market rents due to the higher potential rental income. But for ZIP 94966, where the market rent is currently unknown, the stability offered by Section 8 at a lower gross yield could be seen as a more conservative and reliable investment strategy.
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.