All Forum Posts by: Dave Martin

Hi Nate,

I'd agree with what Bill said and expand it a little - if COVID, a long lasting recession, insane money printing, whatever, were to slow down oil and gas activity in the Permian Basin for any substantial period of time (years not months or weeks), then the economy has some much larger problems than one market's strength.  The reason is simple - the US economy is a force of nature even during downturns and for the time being (decades not years) our economy will depend heavily on oil and gas. If we see drilling in the Permian Basin halted or severely contracted for extended period, then we'll most likely be in a depression and have plenty of other things to worry about! Let's assume for this discussion that we aren't facing that dire of a future.  Then what can we say about the area's recovery?

The USGS announced in late 2018 that their surveys estimate the Permian Basin contains 46.3 billion barrels of oil and 281 trillion cubic feet of natural gas.  That finding effectively doubled our current untapped reserves of both energy sources. This oil and gas will come out of the ground sooner rather than later and any downturn will be followed by a recovery due to our insatiable demand for energy.  The obvious caveats go with this: O&G can be a wild roller coaster ride, so make sure whatever property you look at can be cash-flow positive during the downturns. If you can negotiate seller financing for the deal and the seller is motivated enough to move the property, then you can build in loan terms to protect you and your investors from the dreaded capital calls because the property is in the red.

As to the property you are looking at, self-storage is often considered as close to 'recession proof' as you can get. This is especially true for Midland/Odessa where so much of the workforce is transient. During good times, they move from site to site and need a place to keep their stuff. They often leave the area after working for months (just to take a break or to wait out a market downturn) but are fairly sure they'll be back and need a place to keep their stuff.  I have been looking at RV parks in the area since last year and have found that those workers, a surprising number with their families there with them, need a place to... you get the idea. 

Have you analyzed the SS market saturation in Midland/Odessa?  Unless it is insanely high, you may have a good opportunity in front of you. Especially since in this downturn, you can find great deals from people just wanting to get out of the market. As Buffett says, buy when others are fearful. Make it clear to the seller that in order to close the deal, they'll need to provide you with P&L's going back to 2014 if they've owned the property that long.  That way, you can see how the property performed during the last major downturn. Don't budge on this requirement. To answer your question on the market in 2015-2017 decline (really late 2015 to mid-2016 based on operating rigs), there was indeed a sharp decline in rents and occupancy (a potential positive for SS when people move into smaller places and need storage space).  It ended up being a check-mark recovery with rents recapturing their 2015 levels and then rising even further.

One last observation about the market:  during that late 2015 to mid-2016 downturn, ~76% of the rigs in the Basin where shuttered.  The Midland sub-basin has the least costly O&G extraction price of the entire Permian (as per Dallas Fed energy surveys), so you often see activity there while the rest of the PB is shut in. We were actually in a slow contraction starting in late 2018 to February of this year with ~20% of PB rigs being shuttered due to low oil prices. The RV park I'm focused on was still cash flowing like an ATM. Then the Saudis and Russians got into a supply tantrum followed by COVID collapsing global energy demand resulting in our current market. Things look solid at the campground even with the expected reduction in revenue so I'll probably be moving on the property in the next month or two.

Hope that long-winded reply helps some! Oh, to clarify - I live in New Mexico, next door to Texas. I've been tracking Midland/Odessa for almost a year and have gotten to know the seller and other people in the area pretty well.  I've been down there more than once and visited over two dozen other RV parks while doing our three days of due diligence at the target park. I don't mean to say I'm a market expert or a local, but I have done several deep dives into the area.  Interesting market for sure, though the oil and gas industry is subject to substantial swings and isn't for everyone.  Also, the RV park purchase will be listed as a SEC 506(c) exemption allowing free and open discussions about its returns and the investment.

Good luck, let us know what you decide to do!

Dave

Hello folks,
I have an investment opportunity that I'd like to list on the Marketplace but I'm not quite sure how to fit this property into the criteria.  (This syndicated investment will be listed using a 506(c) exemption allowing for advertisements.)  It is a park that has almost equal numbers of RV pads and studio-style private cabins.  When I look at the Marketplace listing tool, I'm not sure if this should be called a commercial property or 'other.'  Even with commercial, it asks for items you'd associate with a SFR or apartment bldg (bedrooms/baths, etc.).  Any tips on using the Marketplace properly for such a listing?

Thanks!

Hello folks. I'm looking for insurance quotes for a campground in TX (it has 89 units, about a 50/50 mix of RV pads and individual cabins. Any suggestions? Thanks!

Dave Martin, Manager

Legion Investing, LLC

@Arlen Chou that all makes sense, thanks.  I don't foresee branching out beyond multifamily investing but you never know, might as well go with a name broad enough to have the larger support structure as you suggest.  Your company name certainly accomplishes that while being easy to read, say and remember.  Appreciate the input!

Thank you both for the replies!

@Arlen Chou - you're absolutely right about changing names and rebranding midstream.  It can be done successfully (I always think about ING to Voya) but it's costly to be sure.  If I were to head in a different direction as you suggest, like construction, I think I'd form another company for that purpose.  So Martin Properties, Martin Construction, Martin Donuts, etc.  But for the initial company name, it needs to be something I can settle into for the long run and not tinker with.  Appreciate your feedback!

@Eduardo Zepeda - that's exactly what I was trying to avoid with REI, it makes sense to us but not to the general public. The people I'm trying to build into an investor list aren't currently RE investors for the most part so REI won't help them associate me with anything but an unknown abbreviation. I headed down the path of other names just as you suggested but there were either other companies with those names already established or it just didn't sound good. (Martin is just an example, I'm not a proponent of using my name in case I want to sell this thing a decade or two later.). But I agree with your premise, I'll keep pondering the names. Thanks!

Heyas - quick question for ya's: I'm trying to nail down a company name and can't decide if I can/should use REI in the name or not. Will non-REI people be turned off by an abbr they don't know stuck in a company name? Spell it out and the name gets long (ie Martin REI vs Martin Real Estate Investing). Thoughts? This may sound trivial but I'm trying to get my branding done once and done right. Thanks!

Hi Matt,

Thanks for your reply. I am looking for a NM attorney to handle reviewing LOI's and contracts as well as any issues that arise leading up to and including closing. This is specifically for MF properties here in NM, out of state properties will require an attorney in that location. I'm sure there's more that will come up than I'm listing here but you get the idea.

Dave

Hello all,

I'm looking for an attorney in Albuquerque, NM that specializes in multifamily/apartments.I’d also like some referrals for a RE oriented CPA.I have a money raising attorney for my team but would like a local RE attorney to use.Thanks in advance!

Wondered if Edward's webinar was live too but he read and answered my question so live it is.  Still not sure if his program is for me, will check out Chara's material as well.

@Account Closed - Those reviews may not be the most accurate as you've probably realized. Younger people may see a 'normal' level of crime and think its a war zone. There's a thriving night life along Central Ave starting on campus and going east to an area called Nob Hill (some pricey homes up there too!). Will you find crime? Sure, but we're talking property crime in that area mostly (car break-ins, etc.). And yes, there are assaults as well - is it incredibly dangerous though? No, not appreciably more than most major metro areas. As in any city, be smart and have decent car insurance! fwiw, I moved here ten years ago from Arlington, VA in my early 40's and ended up getting my undergrad degree at UNM and am currently wrapping up their PharmD program later this year. What will you be studying here? I'd be happy to provide any insights about the school, msg me if you want so we don't bore the heck out of people here! (This reply got away from me, sorry folks!)

As for areas in town... Abq is roughly divided into four quadrants by two interstates, 25 and 40.  The city has an older side (east of I-25) and a newer side (west).  You'll find some of the wealthier spots in the upper NE parts of town.  There's a lot of residential areas in that entire NE quadrant, some areas having more crime than others.  The most crime probably occurs in the SW parts of town, but there's plenty of nicer areas there too.  You just have to look around and check for crime reports.  On the NW side, there's a lot of newer malls and housing which attract younger professionals.  Even further north is Rio Rancho, a city unto its own that incorporated in 1981 but still has many structural/governmental ties to Abq.  That area has some VERY dense housing, something you'd expect to find in a much larger metro area.  Lots of downtown Abq commuters up there but also a lot of folks working and living in RR.  The SE quadrant is occupied by Kirtland Air Force Base and Sandia National Labs (both are very large).  Plenty of residential areas there including a healthy supply of MF and apartments.  Some areas along Central Ave (we're 3-4 miles east of UNM at this point) can get dicey crime-wise but there's also some good neighborhoods as well.  Finally, there's a business district in the center of town with museums, restaurants, art galleries, etc.

Ok, that's the quick and cursory overview of the city, I left a LOT out.  Our other members can fill in gaps as well.  UNM is a larger school at 27,000-ish students and it has a lot of support in the town.  Abq has a unique, quirky charm to it just like the rest of the state.  NM is pretty poor and our politics can drive you insane sometimes, but I found the DC area to have as much if not more crime (in certain areas of course) and the people here aren't nearly as impressed with themselves.  

I am just getting into real estate investing and am already finding a seemingly endless variety of properties to consider. For SFR, you can find deals pretty much everywhere starting at $50K and going up as high as you like. Lots in the $100-150K range. MF and apartments abound as well, especially around Kirtland and up on the west side (that's pronounced west syyyyeeeeeeede, and you have to yell it). On the downside, our economy and jobs just can't get rolling. There's lots of reasons but its primarily due (in my opinion, of course) to our politicians not being able to figure out how to attract and keep businesses. States around us are have some strong job growth (AZ, TX and NV to a certain extent). But companies fly over NM to build build new factories and business centers all the time. And yet, there is still enough growth and appreciation here to generate some great wealth in real estate. If they ever figured out how to attract businesses and budget better, then we'd go boom!

Anyways, if you have any questions, feel free to ask!  Sorry this got so long, but your great inquiry deserved more than a three sentence reply.