Houston Rehab Projects

7 Replies

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?

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.

Depends on the neighborhood and how fast you get in and out. I just watched three come on the market and sell at asking price in less than a week. Houston is dependent on oil revenues but it's a huge city. 

Oil prices are down here in the Alamo city but it has little effect on the demand for our affordable houses. Lots more here than just oil and gas! :) My partner isn't remotely worried. Huge never ending demand for 100k and less houses. 

I've sold 10 houses in the last month myself here, had one 55k deal go in 12 hours two weeks ago. Had 20+ buyers for that one. 

military and construction is big here, not just oil. Good luck. 

Thanks for all of the feedback gents! It is very valuable to me. 

@Michael Bryan  being a geologist myself I really have trouble believing that the earthquakes are the result of fracking in the Barnett but the earthquakes are a good thing to take note of as an investor! 

It is good to know that Texas is diversified enough in other industries. Here in Alberta we are very oil dependent.

Recessions are caused by shocks to the system. For most of the country lower oil and gas prices are a benefit but for producing regions like Texas this is going to create a downturn. I would take a break and hold cash, if the bottom falls out of the market you want to be the person sitting on the sidelines with cash, not trying to unload a flip that is backed by a HML.

Just because it worked yesterday doesn't mean it will work tomorrow.  Hold your cash and clean up big time in 18 months.  The Great recession started in August of 2007 when the mortgage market collapsed but the rescission didn't officially start till 2008.  Look up "Jim Cramer Rant" on You Tube.  the guy was mocked because he lost his cool on air but he was 100% right, it just took the rest of the world 9 months to realize it.  The oil price drop will hit Texas hard but not so much the rest of the country.

Here is the link:  Cramer Meltdown

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