Another thread about buying first property. Would like some guidance.

3 Replies

I found (what I think is) a good deal on a duplex in Billings, MT.

Asking $75,000 for a 3+1/1+1 duplex. I think I can get it for $70,000.

It is currently rented out and it brings in $900 in rent total per month.

It is in a relatively good neighborhood with two schools close by.

Based on the simple rule of thumbs (the 1% and 50% rule), it seems like a good investment with positive cash flow ($450 in expenses and about $250 mortgage)

Now with that said, how important is it to know the cap rate, tax, insurance, vacancy rate, etc?
If it is crucial for me to know those figures, do I just ask an agent to get me the information or do I have to go through the appropriate sources (ie county court, quotes, etc)?

I apologize in advance if this is a really dumb question. I'm just getting started in RE investing and trying to learn as I go.

welcome to the site steve

@Steve Kim

We all started somewhere Steve. Better to ask your questions here on BP and corrected than have your checkbook do it later.

Passing the 1% and 50% rule is just a start. Those tell you that a deal is actually worth digging into. The next step is to find out how much the building is going to cost you.

Once you've figure out how much you're going to pay for the building, you need to find out these numbers as well:


Sewer and Water




Cap Ex and Ops


Mgmt Fee - as a % (the general consensus here is figure 10% even if you are going to self manage)

Vacancy- as a %. 8% represents 1 vacant month/unit/year

Post everything back here and I'll tell you what I would pay for the place.

Cap rate is really more useful/applicable for larger properties, not plexes.

But yes, you'd pretty darn better know the property tax and what your insurance will be, because you're going to be paying those and it will affect your cashflow and thereby your buying decision. (50% rule is good for initially qualifying a property as one you're interested in, but once you start looking at an actual property it's good to have more real numbers.) It's not hard- look up the property tax on the county assessor site, call a few insurance brokers...

Vacancy rate is available usually from property managers or the local real estate organization- You want to know this, or at least have some idea of how in demand the type of housing you're looking at is. If there are empty apartments all over town, you may have trouble filling your own vacancies. And there goes your dream of raising the rents, right?

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