What are your thoughts on the Odessa, TX market?

Question

From what I've seen on my time on BP, success can be found in interesting markets. What are your thoughts on Odessa, TX?

Ashlyn Arnold · Answer

Jesus, my wife and I have been active in Midland/Odessa for 2 years - 4 flips plus 3 SF rentals. Midland is overall nicer but discovered that we like the blue collar get-to-work vibe of Odessa.

The Market:

If you invest in Odessa, you will be violating one big principle - Don't invest in single industry areas. If there is only one economic driver, then the region is prone to boom/bust cycles. And since the mid-1970's, that is exactly what has happened in Midland/Odessa. Energy industry gets hot and then it gets cold. HOWEVER, my non-expert read is that we have 5-15 years of good times in west Texas. The oil fields and pipelines and refineries have the extraction and distribution capacity to deliver products (oil and natural gas) that are and will continue to be in demand. And ground is broken for a new refinery west of Odessa. Even though a ton of rental units and new SF have been added in the last two years, there is demand for more, especially on the lower end of the market. We will bring another rental online in a few weeks and will likely add more.

NOTE: You can get a really good deal on older pre-1960 properties, but be very careful. The minerals in the water eat up galvanized supply line and cast iron waste lines, so units with copper and plastic will avoid a lot of expensive repairs.  And make sure you are have confident in you insurance company - hail storms are a real thing.

Rich

Mason Moreland · Answer

Good market if you buy well. Oil fundamentals look strong for the long term right now as well. Steady Eddy.

Odessa is definitely more O&G centric while Midland is somewhat less oriented towards blue collar (field workers, oilfield supply, and services), and more toward "white-ish collar" (engineers, geologists, high skill trades, finance, etc) than is Odessa. Both have areas which tend toward one side or the other however.

Lots of homes on market right now in Midland where I live, many still asking crazy or somewhat high prices and sitting for extended times. Maybe still catching up to realistic buyer demand/prices? I have a feeling we will maintain values OK in a RE crash this go around as oil fundamentals look to be steady-ish long term regardless of broader US financials because of externalities beyond the USA.

Matt Moreland · Answer

We've got some rentals in Midland/Odessa and lots of family from my dad's side that live in both cities, including my brother @Mason Moreland who lives in Midland with his family. @Hunter Hall is another friend and investor in Midland who has lots of experience with the real estate market there as an investor.

They were at one point in time more distinct markets than they are now, but as both cities have grown they have (in my opinion as an outsider) become more of one large market with each having slightly different clientele in each. For example, you're going to see a lot more man camps leased by oil & gas companies in Odessa where they house multiple oilfield workers simultaneously, and lots of young oilfield workers leasing up houses and apartments. In Midland, you'll see a lot of folks working in both Midland and Odessa who aren't necessarily working directly in the oilfields. I.e. lots of folks working at the offices of Oxy, Pioneer, EOG, Shell, Frost Bank, etc. Midland seems to be where people coming from other cities in Texas tend to locate themselves. Mason and Hunter can surely correct me on this if I'm off the mark.

We've got four units in Midland off of Midland Dr. and have had residents of both the oil & gas and unrelated industries. When the market is booming, rents are way up and payments are never missed. Having O&G tenants is great in those times. When the market is way down, that's when it's advantageous to have bought at the right time when numbers work regardless of what oil prices are doing. We've had teachers, QSR workers, retail workers, tutors, etc. residing at our property that have been able to afford rent regardless of market conditions. Regardless of the fact that Midland and Odessa are heavily O&G focused, I think buying a deal that has good fundamentals is more often than not a good move.

Michael Mendez · Answer

@Ashlyn Arnold

I agree, the only hiccup I've run into with investing in Odessa and Midland is the finding a lender that is willing to loan out there. I've heard of a couple hard money lenders, however, they require more $ down than Lubbock does. It's interesting how the different the Midland market is compared to the Odessa Market.

Jesus Morales · Answer

Thank you for that amazing advice! We've recently acquired a couple of properties in Odessa and one today in Midland. Really wanted to hear from other experienced investors. I really appreciate you taking your time to comment on my post!

What are your thoughts on the Odessa, TX market?

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