I'm hoping someone here has some insight into the market in west Texas, specifically Pecos and Reeves county.  I have been offered an investment opportunity that cash flows very well on a new construction duplex.  Builder claims very high occupancy rate due to big oil boom in that area after discovery of possibly the biggest oil field in the world late last year.  The economy is ramping up in that area to support the massive drilling/fracking that is to come with housing being a major player.  Is there anyone from that area that can confirm or report on what is happening there?

@James Richards

I have done some out that way.  The market has softened some and I would be hesitant with the claims being made by the builder.  

When things are good in that area, there are REALLY good as landlords can almost name their price.  However, we a downturn happens, the overbuilding that is created by the boom creates some lean times

Thanks for the comment!  Do you know if there is supply to meet demand now?  Do you see the market growing due to this:

http://www.expressnews.com/business/eagle-ford-energy/article/Apache-discovers-immense-oil-and-gas-field-9207444.php

I'm not from the area but here's what I think/know.

I think asking people there might get you a biased answer.

Here's what I gathered:

MMEX just bought some land so it's a good first step. It doesn't mean you shouldn't stop being a little cautious because they need some serious financing for their plans to take off (market analysts don't like the books with MMEX as they have a lot of debt; stock price $0.01.)

 Investing in the area is a good idea depending on your goals. Short term- if it cash flows and you aren't worried about a little longer vacancy at first, I think go for it. Trump and Cruz probably want it to happen sooner rather than later. Long term- it will likely pay off big at some point (There's oil there right?). It's just a matter of when (consider that this would be the first new US refinery in 40 years).

I didn't realize there was anything going on in that area. From what I've heard and read, the majority of oil found wasn't even in those counties. I thought it was closer to Midland/Odessa, but I may be wrong. If you can buy in that area at the right time and be cash flowing no matter where the local cycle is, then go for it. I would find someone in the area that you really trust to help you with analysis. There's no way for you to recognize a deal on your own, being from California, and most people will either lie to you or not know what they're talking about. Unfortunately, I don't personally know any investors in that area, but I'm sure there's several here  on BP. You might try to find them and message them.

@James Richards   Be very careful.  Nearly all of the jobs in the oil industry are temporary.  Once the wells are dug not many people are needed.  Far fewer wells are needed these days because of technical reasons.

The field you are talking about will have a high gas component and is in shale.  That means less wells.  They will be horizontally drilled then fracked.  The gas and oil will be moved mostly in pipelines not by rail.

If you were talking about a fleet of mobile homes you could set up at a temporary mobile home park and then move when the workers leave I would be saying.... "That might work."

always assume that big claims are baloney, but research and inspect anyways

the real estate game is won by acting like you weren't born yesterday (because you arent)

I am currently employed in the oil field and I used to work in that area about 7 years ago. Drilling requires a fairly large staff of people. The more drilling, the more people needing a place to sleep.

Keep in mind that when oil prices rise or are high, there will be a high demand for housing and/or places to rent. The drilling companies are the first to show up (boom) and the first to almost completely vacate an area (crash) and variable demand between those times.

Now I know many good honest people that work on the drilling rigs and most companies have strict policies. However, some of the folks working for the drilling companies are those who are going to be your rougher tenants. Again, this is not a stab at all drillers but as a word of caution that this is typically more common with this type of tenant.

There are several different job types and stages in the oil field.

Beginning of a well:
Construction crews (builds the pad)
Drillers
Pipeliners (come and go as well depending on the current pipeline infrastructure or lack thereof)
Truck drivers (equipment)
Fracking crews.

After well construction:
Construction crews/welders (build compressor stations and/or transfer stations)
Truck drivers.

After well, pad and construction is completed: (These are your more steady, longer term tenants)

Pumpers/gaugers (maintain the well and oil/gas production from the well.)
Production employees (manage the flow of gas and oil and sends those products to the buyer)
Mechanics/maintenance employees (maintains compressor stations and other equipment)
Environmental regulatory compliance employees (small number of these people)
Truck drivers.

I'm sure I have missed a bunch and not every well and/or company operates exactly as stated but that is the basics of it.

I'm not sure if you wanted to read all that. 😄

My personal opinion is yes you can make a lot of money if you play your cards right but it's up to you if the reward is worth the risk. Nobody really knows how stable the oil field will be but I can just about promise you, the oil field isn't going away in the near future, but it will probably be a roller coaster ride as in it's history. It seems to me that about every 10-15 years there is a boom and crash so as long as you have an exit strategy and plan on the crash happening, and the numbers still work even through the crash, I think it would definitely be worth considering. Just be cautious and plan for the unstable times.

Hope this helps.

@James Richards I do no not live in the area but I do work in the area. I work in the oil field and have been in that area for the past 3 1/2 years on the drilling side of things. The field that they are talking about is very broad. Going from Midland west out to Pecos and up into New Mexico. I have been out there drilling in the slow times which operators still drill in the slow times to boom time which is now out in that area. I have heard the housing has gone back up. There is a lot of traffic on all the highways in that region. It is just crazy in that area rite now. I would say the main hub is Midland/Odessa. Pecos Texas is about a hour and a half west from Midland. Pecos does not have the infrastructure that Midland has. It still only has a regular Walmart and much of the housing looks to be built I would guess around the 50's. Shoot me a pm and we could talk further if you would like. Good luck in what ever your decision is.

The last two responses were excellent and really exactly what I was looking for: current views from the ground in the area of question or expertise in the oil industry and how it relates to real estate.  They are much appreciated!

Maybe I am just too conservative which has helped me keep doing this for 27+ years through several downturns.  I don't want to come across as a hypocrite as I would buy a smoking deal in Pecos/West Texas right now.  However, I would only do it with the short term in mind

I am not sure how anyone can say you are going to make lots of money as none of us even know what the numbers are.  I would ask myself, if this is such a great deal why would a builder have to look to California to find a buyer ?  If I were you, I would make sure the numbers still work at 1/2 what the current rent is now because that day will come

Originally posted by @James Richards :

The last two responses were excellent and really exactly what I was looking for: current views from the ground in the area of question or expertise in the oil industry and how it relates to real estate.  They are much appreciated!

 James,

I current work in Oil and Gas in Midland and have started purchasing properties here recently. One thing I can say is that the Midland market has been very resilient during the downturn compared to other markets driven by oil prices such as North Dakota. Even with oil prices dropping below $30/bbl the housing market didn't drop but 9% and has rebounded significantly. Throughout the last couple years the Permian Basin had maintained approximately 1/3 of the US rig count. I bought one property late last year and wish I had several more as rents and home prices have taken off (see below). If you need any additional info feel free to reachout. Best of luck!

http://www.mrt.com/news/local/article/Midland-rents-jump-from-last-summer-11732837.php

I know it's hard to find a man camp sometimes in that area when I frack there. There always has been activity in the Delaware Basin, but it is ramping up (especially since the Alpine High discovery). You could make some money, but just  be prepared to deal with oilfield workers who might be rough on the property. You might have a high vacancy rate, too, due to the nature of the work and the workers. 

@James Richards Like many have stated here, it's not a long-term solution. Once the resources are gone, the people will go away. This is exactly what happened to Tombstone with the silver mining in the 1800s. History has a tendency to repeat itself. Just something to be aware of. Good luck! 

MMEX got their permit today....