Am I bringing unrealistic expectations to this market? Nothing pencils out....

[Lee W.]

Hey BP, long-time listener, first time caller here.  I'm at the very beginning of my real estate journey and I believe I'm in need of a reality-check from people further down the road than me.

I'm looking at long-term buy-and-hold rentals in northwestern Montana, and I'm fortunate enough to be about an hour's drive from a college town (to my south) and a tourist-driven town (to my north).  Over the last couple months I've run BiggerPockets calculator-analyses on three or four dozen small multi-family properties at list price, and then re-run them with progressively more aggressive offers - 5%, 10%, sometimes 20% below asking price.  Almost none of them cash-flow on day one.  

I want to make sure I'm not the problem before I conclude the market is. Here's one representative deal so you can see exactly what I'm working with:

Property: ~$860k duplex in town

- Rent: $4,700/mo (existing tenants)

- 25% down, 7.10% on a 30-year conventional

- Insurance: $300/mo

- Taxes: $360/mo

- Vacancy: 8% of rent

- Maintenance: 10% of rent

- CapEx: 10% of rent

- No HOA, utilities tenant-paid

At list price, monthly cash flow is -$1115, cash-on-cash -7%, DCR 0.65.

If I get the seller to take 10% off ($775k, my "reach" offer): cash flow goes to -$687/mo, CoC -5.6%, DCR 0.72.

If I want to get into 'disrespectful offer' territory and hail-mary a $635k offer, THEN I get: cash flow to -$18.50/mo, CoC -2.46%, DCR 0.88.

That's the ONLY scenario in my whole pipeline where the deal cash-flows on day one, and it requires the seller to cut $225k off their asking price.

Every other property I've modeled tells the same story: Rents in this market are roughly $3,000–$5,000 on multifamilies priced $650k–$900k. The 1% rule is a fantasy here.  Most properties land at 0.6–0.8% rent-to-price.

My questions for the community:

1. Are my assumptions off?  The 8/10/10 vacancy/maintenance/capex savings feels standard but my realtor tells me many investors run leaner.  Am I being too conservative?  Is there a number I'm padding that shouldn't be?

2. Are my expectations off?  Is "day-one positive cash flow at 25% down" just not a realistic ask in 2026 in a desirable mountain/college/tourist market?  If so, what ARE reasonable expectations here - Break-even with appreciation upside?  Slight negative with the plan to refinance later?  I'm so new that I don't know what "good" looks like in a market, so I'm relying on assumptions baked into spreadsheets.  

3. Am I looking at the wrong deals? Should I be hunting MTR/STR conversions, house-hacks, BRRRR candidates, seller-financed deals, something other than vanilla buy-and-hold? Is there a structure I'm not considering that makes these properties work?

4. Is the market just wrong for me right now?  Totally open to hearing "kid, this isn't a cash-flow market, it's an appreciation market; go look at the Midwest if you want cash flow."  I'd much rather hear that now than after I'm locked into a bad deal.

I'm not married to any of this.  I'd much rather get chastised on a forum than learn the lesson by writing a check every month for ten years. Beat me up, recalibrate me, point me at resources I should be reading.  I'll take whatever you've got and will cheerfully adjust my headspace and timing.  

Thanks in advance.

[Nicholas L.]

@Lee W.

have you been too conservative?  no.  listen to a few of the recent BP podcasts.  @Dave Meyer recommends underwriting deals with 0 appreciation.