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Landlord-tenant relationships and asbestos issues
are among speaker topics, he says.
Parrish says it can take six months to a year
before most novices are truly ready to take the investment
plunge.
Although factors such as war, corporate scandals, earnings misestimates
and aggressive competition can have sudden and drastic effects
on stock prices, "Real estate doesn't change like that,"
Parrish says. "Market changes happen more slowly. It is
far more stable."
In fact, enrollment in stock-investment clubs
has dwindled significantly, declining 43 percent from a peak
of about 500,000 in 1998, according to the National Association
of Investors Corporation in Madison Heights, Mich.
Real-estate investment clubs boast of the following
benefits:
- Real estate isn't subject to daily price
fluctuations.
- First-year returns of at least 5 percent
to 10 percent are common on real-estate investments.
- Investment decisions aren't subject to "group
think."
- Clubs focus on education and networking,
not pooling capital.
- The complexities of selling real estate discourage
impulse-selling, thus promoting long-term investing.
But there are also some things to be wary of:
- No fast liquidity.
- Some clubs are thinly-veiled forums for overpriced
"get rich quick" programs.
- Clubs may not benefit veteran investors if
weighted too heavily with beginners.
- Investment partners promising to "bird
dog" an advantageous property using another member's
capital may be untrustworthy or have radically different
exit goals. Investigate track records and references of
potential partners, experts say.
- Newcomers should never make hasty investment
decision shortly after joining.
John T. Reed, a real estate book author known
as the "anti-guru" of the industry, says some real
estate investment clubs are very useful, "but others
exist to serve the interest of the speakers or a real estate
gent trying to acquire business. You just need to attend a
few meetings and get a feel."
As in all real estate ventures, club participants
should err on the side of caution, says Dweck, of the Boca
Raton organization. Boards of directors plagued by "paralysis
analysis," he says, run some clubs, while others "will
get you into their seminars and up-sell you to real estate
training that can cost thousands of dollars." The majority,
however, seem to be on the up and up, he adds.
An investment trend that has made some members
a lot of money has also become the biggest obstacle to continued
success, Dweck says. "The rapidly appreciating market
has the frustration level at all all-time high. Affordable
properties are getting almost impossible to find."
If potential members are considering real estate
clubs only to diversify their portfolio, a real estate investment
trust or real estate mutual fund might better suit their needs,
club organizers say. That's because investment in real brick-and-mortar
equities is fraught with legwork and homework, and demands
steadfast attention to administrative, legal and financial
details.
"Some people get into it thinking it's
a game," Dweck says. "It's not. It's a business
and you have to work to keep up with it. That's where we can
help."
State-by-state real-estate investment
club listings can be found at REIclub.com
and CREonline.com.
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