Houston Rehab Projects

[Cal Ewing]

I am just wondering how other BP members feel about committing to a buy, fix and sell strategy right now in Houston with oil prices as low as they are? Do you feel that there is a significant risk of property values dropping while you are in the middle of a flip thus depleting profits and potentially resulting in a loss?

Also wondering if other Texas cites like Dallas-Fort Worth or San Antonio that aren't so strongly tied to the oil and gas market might be a safer bet?

[Michael Bryan]

All areas of Texas are going to have strong oil and gas ties. Houston is by far the most tied to the industry and therefore would be the most impacted by elongated dips in O&G pricing.

San Antonio is the nearest major city to the Eagle Ford shale which is currently the largest and most active shale play in North America. The DFW area is slightly less tied to the industry. During the past year though there have been a number of earthquakes in that area, which has never really happened in that area before. Some speculate its caused by fracking/drilling activity in the Barnett shale that sits below North Texas. The only thing that has been proven is that there is a fault line that runs underneath the area that has been inactive for quite some time.

General point of all this is to say that you are right when you say Houston is the city most tied to the O&G industry in Texas; however, most of the other major cities are more tied to the indsutry than you might believe. If prices stay low, the economy in San Antonio and demand for housing (both permanent and temporary) will begin to fade drastically. If the earthquakes continue in the DFW area, property values would be likely to fall as well. The earthquakes do seem to be concentrated in that one city (Irving), so if you decide to look more closely at investing in DFW, I would steer clear of there if you have concerns.