Missoula, MT Cap Rate 1.51%
Missoula is the cultural and economic anchor of Western Montana — anchored by the University of Montana, a deep outdoor-and-creative-class economy, and the broader post-2020 Mountain West in-migration. The 1.51% cap rate at a $560,000 median price reflects sustained post-2020 pricing pressure. The 0.27% rent-to-price ratio sits well below the 1% rule. Population growth at 1.2%/yr remains strong but has decelerated from the 2020-2021 peak.
Employment is anchored by the University of Montana (the state flagship with ~10K students plus the broader research, athletic, and forestry-and-conservation programs that have unusual national prominence for a metro this size), Providence St. Patrick Hospital and Community Medical Center, the broader healthcare ecosystem, the broader US Forest Service Region 1 / Northern Rockies operations (Missoula is the regional Forest Service HQ — a major federal employment cluster, with the related smokejumper base, fire-management infrastructure, and forestry research), the broader Lolo National Forest operations, the broader outdoor-and-recreation industry (the broader Pacific Northwest outdoor brands ecosystem plus the Rocky Mountain Elk Foundation HQ), the Missoula County government, and a meaningful tourism economy. Submarkets stratify cleanly: the historic Rattlesnake / South Hills / University area is walkable urban with strong appreciation; the broader Target Range and Lewis & Clark areas are premium suburban-school; the campus zones are student-heavy with operational complexity tied to August-to-July leasing; the broader Missoula extends with cheaper rural-edge basis.
Montana has no state sales tax but does have a state income tax (graduated, top rate near 5.9%). Property tax at 0.78% is on the higher end for the Mountain West, and Missoula County's reassessment cycle is multi-year (the next reassessment will reset newer purchases sharply higher relative to seller's historical bill — model accordingly). Insurance is reasonable but verify wildfire / wildland-interface exposure carefully (Missoula is in heart of the Northern Rockies fire ecosystem — the broader Western Montana fire seasons since 2017 have repriced insurance in some submarkets). STR regulation has tightened: Missoula has restricted STRs in residential zones; verify per parcel before underwriting. The structural advantages: U Montana enrollment is durable; Forest Service / federal forestry employment is genuinely stable; the outdoor-lifestyle migration thesis has been continuous for years. The structural risks: migration-narrative sensitivity (the pricing thesis depends on remote-work flexibility continuing); housing-supply constraints can produce sharp downside if demand softens. For long-hold appreciation investors comfortable with current pricing, Missoula remains compelling — for cash-flow buyers, the math doesn't pencil.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Missoula
Missoula's 0.3% rent-to-price ratio is well below the 1% rule. At median prices of $560,000, the $1,500/mo rent produces only $706/mo in NOI. Investors here need to target below-median properties or pursue value-add strategies to make the numbers work.
At current rates, a 20% down conventional loan ($112K at 7%) would result in approximately $-2,273/mo cash flow — negative at median prices. Larger down payments, seller financing, or buying 15–25% below median are strategies to turn the numbers positive.
Property taxes consume 24% of gross rent here — one of the highest ratios in our dataset. This significantly compresses margins and makes Missoula a market where tax-conscious underwriting is essential. Every deal should be stress-tested with potential assessment increases.
Deal Modeling & Scenarios for Missoula
All figures below are computed from Missoula's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.78% effective rate on the $560,000 median price, the annual tax bill is $4,368 — that's below national average (-26% vs the national average of ~1.06%). Verify the actual assessed value before purchase; sale-triggered reassessments can push the bill higher than the seller's current statement.
5-Year Cap Rate Trajectory
If Missoula continues appreciating at 2.8%/yr while rents grow at a conservative 3%/yr, cap rate holds roughly steady as price growth outpaces rent. Year-by-year projection at the median:
| Year | Est. Price | Est. Rent/Mo | Cap Rate |
|---|---|---|---|
| Today | $560K | $1,500 | 1.5% |
| Year 1 | $576K | $1,545 | 1.5% |
| Year 2 | $592K | $1,591 | 1.5% |
| Year 3 | $608K | $1,639 | 1.5% |
| Year 4 | $625K | $1,688 | 1.5% |
| Year 5 | $643K | $1,739 | 1.5% |
Three Financing Scenarios
Same median-priced Missoula property — different capital structures. All-cash maximizes cap rate. Leverage trades cash flow for higher cash-on-cash return when the spread between cap rate and borrowing cost is positive.
| Scenario | Cash Invested | Monthly Cash Flow | Annual CF | Cash-on-Cash |
|---|---|---|---|---|
| All cash | $560K | $706 | $8,468 | 1.5% |
| 20% down conventional @ 7% | $129K | $-2,274 | $-27,282 | -21.2% |
| 25% down DSCR @ 8.5% | $162K | $-2,524 | $-30,290 | -18.7% |
Three Price Tiers: Below, At, and Above the Median
Properties don't always trade at the median. Lower-priced units typically offer higher cap rates but harder operations; higher-priced properties tend to compress cap rates while attracting better tenants. All-cash assumptions below:
| Tier | Price | Rent/Mo | NOI/Yr | Cap Rate | Monthly CF |
|---|---|---|---|---|---|
| Below median (~75% price) | $420K | $1,275 | $7,315 | 1.7% | $610 |
| At median | $560K | $1,500 | $7,828 | 1.4% | $652 |
| Above median (~125% price) | $700K | $1,725 | $8,341 | 1.2% | $695 |
Total Return Over a 5-Year Hold
Cap rate is just one piece. Real estate returns come from four sources: cash flow, appreciation, principal paydown, and tax benefits. Assuming 20% down conventional financing at 7% and a 5-year hold at Missoula's historical appreciation rate of 2.8%:
On a $112K down payment, that's a -17.8% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Missoula
Automated checks against the underlying data — surface only the risks that actually apply to Missoula, not generic boilerplate:
Cap Rate Calculator — Missoula
Pre-filled with Missoula medians. Adjust to match a specific property.
Cash-on-Cash Return — Missoula
Factor in financing to see your actual return on invested capital in Missoula.
Is Missoula a Good Place to Invest in Rental Property?
Missoula, MT has a population of 78,000 and has been growing at 1.2% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $560,000 paired with median rents of $1,500/mo produces an estimated cap rate of 1.51%.
Property taxes at 0.78% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 3.8% is impressively low, indicating tight rental supply and strong tenant demand — favorable for landlords.
At a price-to-income ratio of 10.7x, homes cost about 10.7 times the local median income of $52,400. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. Home values have appreciated at roughly 2.8% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: At current median prices, Missoula is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.