Location: Seattle-Bellevue, WA | Metro: Seattle-Bellevue, WA HUD Metro FMR Area
| Unit Size | Monthly FMR |
|---|---|
| Studio | $1,930 |
| 1 Bedroom | $2,010 |
| 2 Bedrooms | $2,350 |
| 3 Bedrooms | $3,060 |
| 4 Bedrooms | $3,650 |
| 5 Bedrooms | $4,234 |
| 6 Bedrooms | $4,742 |
| 7 Bedrooms | $5,121 |
| 8 Bedrooms | $5,377 |
U.S. Census Bureau data (2024)
The Section 8 cap rate analysis for ZIP code 98164 provides insight into potential investment returns for landlords and small-portfolio investors. The Fair Market Rent (FMR) for a 2-bedroom apartment in ZIP 98164 for fiscal year 2024 is set at $2320 annually, while the market rent, according to Census ACS data, stands at $2,638 per month.
To derive the gross yield, we first annualize the market rent. At $2,638 per month, the annual market rent would be $31,656. Given that the median home value is not available, we must rely on rental income data to assess the gross yield.
In the case of Section 8, the gross yield can be calculated by taking the annualized FMR of $2320 and comparing it to the hypothetical purchase price of a property. Assuming a property cost reflective of typical values in the area, let's say $400,000 for illustrative purposes, the implied gross yield for a Section 8 tenant would be approximately 0.58%. This calculation is based on the formula: Gross Yield = (Annual Rent / Property Cost) * 100.
For a market rent scenario, using the annualized figure of $31,656 against the same assumed property cost of $400,000, the implied gross yield jumps to about 7.91%. This stark contrast highlights the significant difference in returns between Section 8 tenants and market-rate renters.
The 17.1% renter density in ZIP 98164 suggests a moderate demand for rental properties. However, without the Days on Market (DOM) data, it's challenging to predict how quickly a Section 8 unit might lease versus a market-rate unit. Generally, Section 8 units can lease faster due to the guaranteed income source, but this depends heavily on local demand and program specifics.
Given these figures, the gross yield from a market-rate renter is significantly higher than that from a Section 8 tenant. For investors seeking immediate cash flow, market-rate rentals offer a better return. However, for those looking for long-term stability and lower vacancy rates, Section 8 rentals provide a steady income stream despite lower yields.
Ultimately, the decision hinges on the investor's risk tolerance and financial goals. A higher gross yield from market-rate rentals comes with increased risk and management costs, whereas Section 8 rentals offer lower yields with reduced risk and administrative burdens.
Data Sources: FMR data from HUD (2027). 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.