All Forum Posts by: Brad Gibson

There is a significant amount of capital that is flowing OUT of the Permian Basin right now.  Average hotel room rates have fallen to about $250 per night.  That's down from the high in the early Spring of 2019 of around $800 per night for some place like a Hilton Garden Inn.

I've also seen the rent market soften since last Spring as well.  Oil prices are lower as the economy is trying to decide on a correction or recession in response to a long bull and the trade war escalation.

Now would not be a time to buy in the Permian Basin unless you get a screaming good deal.  The rents may fall under your mortgage and operating expenses since the housing purchase prices are still high and have not softened like rents...yet.

There could be some very good opportunities to buy in say 6-9 months if things really do turn bad.  If layoffs start and people begin to stream out of the Permian, then look for some great opportunities to scoop properties up at a discount.

I think the US and even beyond will have an "Oh crap" moment in the next 12-24 months on oil.  The ability to ramp up production to meet demand will not keep pace after "cheap" oil for the last 3 years or so.   The Permian will roar again and those who got properties will make serious bank.

I have done two or three loans with Finance of America. Two were first purchases for buy & hold. One was a refinance out of an interest only loan to rehab a house that was not insurable & didn’t qualify for more traditional finance. 

FOA on all three loans were SLOW!  They routinely miss deadlines, ask for crazy stuff at the last minute, and hold things up over & over again. None of the loans closed on time & it was due to FOA. All three were at least two to four weeks after the original closing date. The sellers were pissed & I nearly lost two great deals. 

Their customer service & responsiveness teeters between neglect and outright abuse. Reaching someone, much less the right person to help you is near impossible.

That said, the interest rates & terms are better than anyone else by far.  I will never use them again for anything other than a refinance where my timeline is wide open. The rates & terms are great & I’m in no hurry, so I can deal with their sh$t. I would never use them for any deal that has any sort of timeline again.

Those who invest in Texas know that property taxes can be a significant drain on your cash flow for investment properties.  My rule of thumb is to go ahead and tack on about 2% of the value of the home as an expense for property taxes.

I have gone through the property tax valuation protest process which is fairly painless and easy when I think the county Central Appraisal District clearly has it wrong, but otherwise don't bother.  Of late, there have been several mentions in advertisement as well as among some investors about employing a firm to protest the property taxes for each home in the portfolio.  These firms claim to do all of the protests and hearings on your behalf in exchange for 33% of any tax savings they win on your behalf in a given year.

Has anyone used such a service & did you find it to be worth it to turn over the protests to an outside firm and pay the extra money for the tax savings later?

Rents in Midland rose by more than 10-15% in ‘15-‘16.  In 2014 things were flat, but surprisingly did not regress even though jobs in the area fell by 10,000 that year. 

Lubbock is a more stable market than Mildand/Odessa and will likely remain so.

Rent Cafe for Lubbock (average rent):

May 2016 — $928

May 2017 — $915

May 2018 — $910

April 2019 — $907

There have been some bounces both lower & higher in some months, but this has been the trend line. 

I own investment properties in Lubbock as well as Midland/Odessa.

They say there are lies, damn lies, & statistics. 

All I can tell you is my rental property monthly rates have been stagnant for the last two years in Lubbock and there is legit data to back that personal anecdote.

The same is not true in Midand/Odessa. Each place has its own perils. Labor is the issue in Midland/Odessa. You may have a great deal that will be a cash flow monster, but getting any renovation or repairs done could be a nightmare.

All I can tell you is a dollar invested right now in Lubbock returns far less to me than a dollar invested in Midland. 

That may not be the case long term as all markets run in their own cycles & also why I was very careful to qualify my statements. 

 Rent cafe article & if you want to pay, Yardi Matrix. 

Avoid Lubbock for the time being. The market is saturated with rentals, so it is one of two markets in Texas that had negative rent growth over the last two years. 

Homes are still appreciating, so there is money to be made on the appreciation side, but it makes the evaluation of the deal from a cash flow perspective more perilous & critical. 

I would wait on Lubbock or it’d have to be a sweetheart deal for me to buy there for the time being. 

 Oilfield West of San Angelo is what’s driving the Rentals over your way. No-one wants to live in Big Lake, so they rent in San Angelo & commute. 

Wichita Falls was the other market I think, but it could have been S Texas. Will have to go back & look. 

Midland/Odessa is going like a freight train. I figure San Angelo is just as good or close. Big Spring is a great place right now. 

You can buy a little place for 30k & rehab for 40k. Then rent for $1,600 per month or better. That same house flips for 165k. 

Finding contractors & good labor is the challenge. 

Lubbock is one of the two (check me on that) Texas rental markets to have a negative growth rate for rents. 

If you buy there, be ready for pitiful cash flow (if any) for the first several years of your investment as the primary driver for rent is saturated with luxury properties. 

As with any market, if you work hard to find deals, you can find something that'll cash flow, but they're not plentiful & rarely make the MLS.

You’re better off investing where you are going to school as properties that meet the 1% rule are plentiful. It is an oil town with the risk of boom & bust, but this current shortage of housing in Odessa looks to last another 5 or more years. 

As someone who has rentals in both markets, my Lubbock properties are laggards for cash flow. 

Any advice on shopping for an insurance agent or insurance policy as a landlord?  I have been using the same agency who seem to be placing me in higher and higher premiums.  

They offer good service and are very responsive, but they once were finding companies that would be the least expensive rates.  Now it seems, I'm paying a $200 to $400 more per year for a policy with them for similar homes that I purchase.

Just curious about processes other than just phoning everyone in the area for finding a great insurance agent that is willing to work with an investor and find the best possible rates.