Section 8 Fair Market Rent (FMR) for ZIP 95433 - 2027

FY 2027 Fair Market Rent Rates

The analysis of the Section 8 cap-rate scenario for ZIP code 95433 in California reveals some critical insights into the potential investment returns for landlords and small-portfolio investors. The Fair Market Rent (FMR) for a two-bedroom property in this area for FY 2024 is set at $2380 per month. Given the median home value in ZIP 95433 is $737,901, we can calculate the implied gross yield under this scenario.

To find the gross yield, we annualize the monthly rent and divide it by the median home value. In this case, the annualized rent for a two-bedroom property would be $2380 multiplied by 12 months, totaling $28,560. Dividing this by the median home value gives us an implied gross yield of approximately 3.87%. This calculation assumes that the property is rented out at the FMR rate year-round without any vacancy periods.

However, the market rent for ZIP 95433 is listed as N/A, which means there is insufficient data to provide a definitive market rent figure. If we were to assume that the market rent is higher than the FMR, the gross yield would also increase. For instance, if the market rent were hypothetically $3000 per month, the annualized rent would be $36,000, leading to a gross yield of about 4.88%. This scenario suggests a more favorable return for investors compared to the FMR-based scenario.

Given the lack of specific renter density and Days on Market (DOM) data, it's challenging to determine which scenario is more realistic. However, the disparity between the FMR and a potential higher market rent indicates that there might be room for negotiation or adjustment based on the actual rental market conditions. Landlords should consider the local rental market trends and the demand for affordable housing when deciding whether to participate in the Section 8 program or seek market-rate tenants.

The gross yield comparison clearly shows that renting at the market rate could potentially offer a higher return on investment than renting at the FMR. Nevertheless, the decision should also factor in the stability and security that the Section 8 program provides, including guaranteed rent payments and the potential for longer-term tenancies. Investors must weigh these benefits against the lower gross yield when making their investment decisions.

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.