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Shop wisely for real estate investment club

Select a real estate investment club the way you choose a piece of property -- carefully.

The concept is simple: People with a common interest in real estate investing meet regularly to talk shop, listen to speakers and learn from one another.

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Bryan Sklar joined a real estate investors club in Richmond two years ago. An account executive with an office equipment company, he had just purchased his first investment property: a four-bedroom single family home. He knew about investing. But he knew little about being a landlord. He suddenly realized, "I have to manage these people as well as this property."

Sklar went looking for a group.

"I fell in love with the idea of hanging out with people who were doing what my long-term goals were at the time," says Sklar, who is now treasurer of the Richmond Real Estate Investors Networking Group.

At the first meeting, Sklar sat next to "a gentleman who, I found out later, owned 55 investment properties," he says. "I haven't missed one since."

Investment real estate is a hot topic. Nearly a quarter of home buyers are purchasing property as an investment, according to figures from the National Association of Realtors.

When the real estate market heated up a few years ago, clubs and club membership boomed right along with it. Since 2001, the National Real Estate Investors Association, a trade group for investment clubs, has seen its membership grow fourfold.

Even as higher interest rates threaten to cool the market, club growth and attendance remains strong, says Rebecca McLean, the association's executive director. And she estimates that its 174 member clubs comprise only one-third of official organizations. In addition, she estimates, "there are probably thousands of informal groups who meet." Dues can range from $10 at the door to annual fees of up to $200 for larger, more-organized groups.

Find the right fit
In spite of the numbers, though, finding the right club can be tricky. Some clubs are focused on various aspects of investing, such as foreclosures or multi-family properties, which may not suit every investor. Others may be pushing products, services or investments.

"Most groups allow you to visit the first time for free," says McLean. "Take advantage of that."

While you're there, talk to members. Converse with people who have been in the group for a while. Ask questions. "The group needs to tell you what they're about," McLean says. Look for a mission statement or something that tells you "this is what we do," she says.

Who is running the club and why did they form it? "If, in essence, this is being run by some professional, is this the person you want to be your teacher?" says William Poorvu, a professor emeritus of real estate from Harvard Business School and co-author of "The Real Estate Game."

Does the leader have a conflict of interest? It's OK if your group leader is in the real estate or mortgage business. You just need to know it upfront, and not feel that you have to do business with that company. As long as a leader "is not forcing you into a niche or bombarding you with products all the time, having them be in the business in some capacity is not a bad thing," says McLean.

Take note of the leadership style, too. "If you go in there and they're leading you, you've got a problem," says Al Mansell, president of the National Association of Realtors. But "certainly any time you can enhance your knowledge of the investment process and how it works, you're better off."

Some groups are run by several people or a board of members. "I prefer the groups where there's not one ultimate guru, and the speaker who owns the group doesn't just promote their product," says McLean.

Look at the speaker's list. Who have they hosted? What are the topics? Are they educating members on practical topics or advocating risky strategies?

"You want for it not to be just national speakers, but also some local flavor," says McLean. "And some true education about investing as a business."

 
 
-- Posted: April 22, 2005
     

 

 
 

 

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