Whether you are an experienced or beginner real estate investor, joining a real estate investment club is a great way of growing your career or business. Depending on the type of club you join, you can build wealth fast without all the financial risk, work, or stress involved in investing in real estate on your own.
What Is a Real Estate Investment Club?
This is simply a forum that brings together investors, real estate professionals, and industry experts. A real estate investment club is made up of experienced investors, new investors, or a mixture of both. People join such clubs mainly to acquire knowledge and experience about real estate investing.
Generally, investment clubs operate in two ways; independent investments and group investments. Independent investing is where an individual investor buys property on their own. With group investments, members pool their money to invest in real estate. The great thing about the latter option is that you can invest your money passively and let other professionals handle the business operations.
When it comes to membership, there are no legal minimums or limits to the number of people required to launch an investment club. Most clubs are legal entities with elected officials and written investing guidelines that members must follow. To join an investing club, you might have to pay an annual or monthly membership fee.
The Pros and Cons of Real Estate Investment Clubs
Before you join a real estate investment club, you need to weigh all the pros and cons. This will help you make an informed decision.
Benefits of joining a real estate investment club
- Networking – One of the main advantages of joining a real estate investment club is the opportunity to network. Most clubs have physical or virtual meetings at least once a month. You can network with other investors, as well as professionals like accountants, contractors, brokers, real estate agents, accountants, realtors, or attorneys in your area. This real estate network will be very valuable when you want to find investment properties for sale.
Related: The Secrets of Effective Real Estate Networking
- Real estate education – There is usually a guest speaker at every real estate investment club meeting. Topics covered could be rental market analysis, rental property analysis, traditional vs Airbnb investments, or how to close real estate deals. Besides learning from the guest speakers, you can also glean a lot from the collective knowledge of other members. Such an education will help you make better decisions as a real estate investor.
- The pooling of financial resources – As an individual real estate investor, you might not have enough resources to invest in listed or off market properties. Being part of real estate partnerships provides an opportunity to pool money with other investors and invest in income properties that you couldn’t access on your own.
Related: How to Form Real Estate Property Partnerships
- Real-world experience – If you are a beginner real estate investor, being part of a club provides an opportunity to gain actual experience. You will get the chance to interact with people who are successfully closing real estate deals in your area. Through such engagements, you will learn what to do and what not to do when buying or selling investment properties. Gaining such experience will save you lots of time and money as a real estate investor.
Related: 5 Perks of Being in a Real Estate Investing Club
Downsides of joining a real estate investment club
- Scams – Joining a reputable real estate investment club can greatly boost your business. However, there are many stories of investors that have lost millions of dollars in fraudulent clubs. It is therefore very crucial to do your due diligence before joining a club. Do thorough research on the group and its management team. How long have they been in existence? Who is the leader? What kind of properties do they invest in? What are people saying about the club? Are there any suits or claims involving misuse of funds? If you come across any red flags, simply walk away and don’t look back.
- Lack of liquidity – Once you’ve contributed money for purchasing assets, getting it back could be a challenge. Your cash might be tied up for years, and in the end, yield a very small return on investment. Therefore, before joining the group, find out what the process of leaving entails.
- Personality conflicts – Since members of an investment club have different personalities, they are likely to clash in their opinions. As a result, coming to an agreement about important issues might be difficult. This could mean losing potential investment opportunities along the way.
- High membership costs – Besides the annual membership fee, some investment clubs require their members to invest a lot of money or purchase expensive courses when joining. Such costs will end up eating into your profits and cash flow.
How to Find a Real Estate Investment Club to Join
Have you decided that joining a real estate investment club is right for you? How do you go about finding a genuine real estate investment club?
You could simply Google your state or city’s name and the words ‘real estate investment club’ or ‘real estate investing group’. You could also check on MeetUp.com or LinkedIn to see if there are any real estate clubs in your area.
Alternatively, look for the local chapter of the National Real Estate Investors Association (NREIA). The focus of this nonprofit trade association is to educate and protect its members.
Conclusion
Joining a good real estate investment club can be a game-changer for your business. If you cannot find a local real estate investment club that is a good fit for you, consider starting your own. Consult real estate professionals to find out what is required to start a real estate investment group. Attend other clubs’ events to get a feel of how they work. Create roles, set bylaws, and recruit members. Once you have enough members, hold meetings on a quarterly, monthly, or even weekly basis. With enough research and a good plan, you are sure to succeed.
Related: How to Start a Real Estate Investment Club
