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.
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
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."