How To Analyze Monahans Rental Properties

Are you looking at a rental in Monahans and wondering if the numbers truly work, boom or bust? You are not alone. With oil and gas cycles influencing demand, it can be hard to know what to expect. This guide gives you a practical, step-by-step way to underwrite a Monahans rental with confidence, using simple formulas and local checks that matter. Let’s dive in.

Understand Monahans rental demand

Monahans sits in the Permian Basin, where oil and gas activity drives jobs and housing demand. When drilling and related services increase, you tend to see stronger rental demand and lower vacancy. When activity slows, vacancies can rise and rents can soften.

You also have steady demand from local government, retail and service jobs, and tourism connected to Monahans Sandhills State Park. Most rentals serve two tenant pools: workforce housing tied to oilfield and service employees, and local family renters within the city.

To stay ahead of shifts, watch key signals. Track rent and vacancy trends from current listings and local property managers, note any new construction or subdivision activity through city or county notices, and follow employment data and regional drilling reports. These signals help you set realistic rent, vacancy, and lease-up assumptions.

Gather the right data first

Before you run the math, collect details that shape income and expenses.

• Purchase price and terms from the seller.
• Comparable rents from three to six similar rentals in Monahans, matched by beds, baths, age, and condition.
• Property tax information from the Ward County Appraisal District, including current assessed value and rate.
• Insurance quotes for landlord coverage, including liability and wind or hail if applicable.
• Utilities, meters, and who pays which services.
• HOA rules and fees if there is an association, including any rental limits.
• Maintenance history, recent capital improvements, and utility bills if available.
• Zoning and land use, plus proximity to oilfield or industrial sites.
• For occupied properties, current leases, rent roll, and security deposit records.

Set conservative assumptions

Monahans is a smaller market influenced by oil cycles, so plan for variability.

• Vacancy. Start with a buffer. Stable markets often model 5 to 10 percent vacancy. In an oil-exposed area, consider more conservative vacancy and lease-up time.
• Operating expenses. Small rentals often run 30 to 50 percent of effective gross income. Taxes in Texas can be a significant line item. Verify the current tax bill and model a reasonable increase.
• Reserves and capital. Budget for ongoing maintenance and larger capital items based on property age. A simple rule is 1 to 3 percent of property value per year, adjusted to local costs and condition.
• Management. If you hire a property manager, fees for single-family homes commonly range from 7 to 10 percent of collected rent, potentially higher for multifamily or frequent turnover.
• Financing. Many investors use 20 to 25 percent down for conventional investment loans. If you model a DSCR loan, verify current terms. Always test your deal under multiple rate scenarios.

Run the core numbers

Calculate income

Start with achievable monthly rent from your comps.

• Gross Scheduled Income, or GSI, equals monthly rent times 12.
• Vacancy allowance equals GSI times your vacancy rate.
• Effective Gross Income, or EGI, equals GSI minus vacancy allowance.

Be realistic. If your rent comp set shows wide variation, anchor on the lower half and adjust for condition and location.

Build your expense stack

List all operating expenses and use written quotes whenever possible.

• Property taxes from Ward County records.
• Landlord insurance and liability coverage.
• Repairs and maintenance, including routine service contracts.
• Property management fees if you do not self-manage.
• Owner-paid utilities, if any. Confirm whether meters are individual or master.
• Advertising, leasing, legal, and accounting costs.
• Replacement reserves for big-ticket items.

Add these to get total operating expenses. Keep this separate from mortgage payments.

Compute NOI and value

Now calculate your performance metrics.

• Net Operating Income, or NOI, equals EGI minus operating expenses.
• Capitalization Rate, or Cap Rate, equals NOI divided by purchase price.
• Gross Rent Multiplier, or GRM, equals purchase price divided by annual gross rent. Use GRM only as a quick screen.
• Debt Service Coverage Ratio, or DSCR, equals NOI divided by annual debt service.
• Cash-on-Cash Return equals annual pre-tax cash flow divided by your total cash invested, which includes down payment, closing costs, and initial repairs.

Compare your cap rate and DSCR to what similar properties in Ward County are producing. If DSCR is under 1.20 in your base case, the deal may be tight once you factor in oil-cycle risk or tax increases.

Stress test for oil cycles

Monahans rent and occupancy can move with drilling activity. Build three models.

• Base case. Use current comp rents, a reasonable vacancy rate, and quoted expenses. Compute NOI, cap rate, DSCR, and cash-on-cash.
• Downside case. Model a 15 to 25 percent rent drop or longer vacancy that reflects a downturn. Recompute DSCR and cash flow. If DSCR falls below 1.00, decide if larger reserves or a lower price is warranted.
• Upside case. If light rehab or better management can raise rent, model the improvement. Calculate how that affects your returns and payback period.

This simple stress test helps you avoid overpaying in a boom and keeps your cash reserves realistic.

Property-level due diligence

Dial in on the items that make or break cash flow in Ward County.

• Property taxes and appraisal. Texas has no state income tax, and property taxes play a major role in expenses. Pull the current tax levy from the Ward County Appraisal District and note assessed value trends. Calendar tax protest and payment deadlines.
• Landlord-tenant law. Texas Property Code governs security deposits, notice periods, and evictions. There is no statewide rent control. Confirm current timelines and any local requirements with a qualified attorney or experienced property manager.
• Insurance and environmental risk. Obtain landlord policy quotes that cover rental use plus liability. Ask about wind and hail coverage appropriate for West Texas. If a property sits near oil or industrial operations, screen for environmental issues and heavy truck traffic.
• Flood and drainage. Review FEMA flood maps and check local drainage patterns. Localized flooding can still occur even when inland.
• Utilities and access. Confirm who pays water, sewer, electric, and gas. Verify meter setups. Road access and proximity to job centers can affect desirability and turnover.
• HOA and restrictions. If the property is in an HOA, confirm rental rules, minimum lease terms, and fee schedules.

Short-term vs long-term rentals

Short-term rentals may be present near tourist draws like Monahans Sandhills State Park. Only consider STRs if local ordinances allow them and the location supports consistent bookings. Remember that STRs require more active management, higher turnover costs, and different insurance and tax considerations. Compare an STR pro forma to a stable long-term lease model before deciding.

Quick 5-step worksheet

Use this simple process to underwrite any Monahans rental.

1. Collect rent comps and set monthly rent.
2. Calculate GSI and apply a vacancy allowance to get EGI.
3. List operating expenses, including taxes, insurance, repairs, management, and owner-paid utilities.
4. Compute NOI and compare to your price to get a cap rate. Cross-check with local comps.
5. Add financing to see cash flow after debt, DSCR, and cash-on-cash return.

Sanity checks before you offer

• If your cap rate minus financing cost still produces thin or negative cash flow after vacancy, the price may be too high for current conditions.
• For small markets, plan for larger cash reserves and a longer resale timeline. Liquidity can be limited compared to big metros.
• Expect higher maintenance for older housing stock. Adjust reserves based on age and recent improvements.
• If your downside case pushes DSCR below 1.00 or wipes out cash flow, negotiate price or terms, or pass.

Where to find local data

• Ward County Appraisal District for assessed values, rates, and property records.
• City of Monahans for permits, ordinances, and any rental registration rules.
• HUD Fair Market Rents for county-level baseline rents.
• Texas Workforce Commission and Bureau of Labor Statistics for employment trends.
• Permian Basin drilling and rig reports to understand oil cycle pressure on rentals.
• Local property managers and listing agents for on-the-ground rent levels and time on market.

Work with local pros

You do not need to figure this out alone. A local team can help you validate rents, set vacancy buffers, and anticipate tax and insurance costs. Connect with a Ward County real estate professional, property manager, insurance broker, and attorney before you finalize an offer. Together, you can align price, terms, and reserves with real market conditions.

If you want an experienced guide who understands West Texas markets and investor underwriting, reach out to Marisa Florez, Realtor Golden Door Realty. Let’s build a plan that fits your goals and the realities of Monahans.

FAQs

How do I estimate achievable rent in Monahans?

• Pull three to six comparable rentals of similar size and condition, then confirm your target rent with local property managers and county-level HUD benchmarks.

Which metrics matter most when buying a Monahans rental?

• Focus on NOI, cap rate, cash-on-cash return, and DSCR, then stress test vacancy and rent for oil-cycle downturn scenarios.

How do Ward County property taxes affect returns?

• Taxes can be a large expense in Texas, so get the current bill from the Ward County Appraisal District and model a realistic increase in your pro forma.

How risky are rentals here given oil cycles?

• Cycles can raise vacancy and lower rents during downturns, so use conservative assumptions, maintain strong reserves, and diversify your tenant base where possible.

Are short-term rentals a good idea in Monahans?

• Only if local rules allow them and the location supports demand, and even then evaluate higher turnover costs against a steady long-term lease model.

Do I need special insurance near oil operations?

• You may need additional endorsements or coverage for proximity to industrial activity or heavy trucking, so confirm needs with your insurance provider.