Thursday, August 9, 2018

Signs the Real Estate Market is Beginning to Overheat

By Joe O’Donnell, President of OMEGA Commercial Real Estate, Inc.

I have been through a few commercial real estate cycles, I have begun to notice signs of the beginning of what an overheated or frothy market look like. Here is my take:

1) Multiple cold calls from New York real estate investors looking to buy buildings in the Philadelphia Market. The conversation goes something like this:

Me: “Why the interest in the Philly market?” the answer is usually the same.
NY Investor: “Well Joe, the New York market is overheated. If I make a 2% mistake in Brooklyn, I am upside down in the deal. I can come to Philly and make an 8% mistake and still be ok.” 
Me:“So you’re coming to Philly to overheat our market?”
NY Investor: “Yes. We need to find any deals.”
Me: (antennas up) "Yikes"

2) Multiple radio advertisements about “gurus” or “experts” coming to your town to show you how to flip houses with “other people money.”  We have all heard them on all the media.  These programs usually offer a free seminar. Then there is pitch for investors program for a few thousand dollars.
 Personally, I have been involved in a few flips. I have friends and colleagues that only flip houses. They don’t want the competition. They also have to have money or “skin in the game” to be taken seriously with banks and investors. Current deal flow for deals that make sense are their biggest issues.

3) Receiving multiple LinkedIn alerts to congratulate people on the newly, minted position at “ABC” real estate company. This is mostly with the residential real estate companies. It seems easy in this market. My residential cohorts are telling me stories about bidding wars and multiple over asking offers that are going to closing. They put a sign up on Friday and under contract by Sunday. Crazy times.

It is always a good time to buy or sell real estate but you have to transact it correctly. Experience is key. If you have a commercial real estate question or issue please give is a call at (610) 616-4604 or (484) 354-2162 or jodonnell@OmegaRE.com

Joe is the President and owner of OMEGA Commercial Real Estate, Inc. in Wayne, PA. He has been practicing real estate for 15+ years. He has owned OMEGA for the past 9 years.

1 comment:

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