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Shop wisely for real estate investment club -- Page 2

Look for seminars on subjects such as local and federal laws that affect the industry, business practices and ethics. They may offer extra classes or mentoring opportunities for a price, and that's all right, as long as it's clear, McLean says.

Does the club feature the types of real estate investments that interest you? A club might focus mainly on buying foreclosures, but if your goals are elsewhere, try a different club.

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What kind of experience do group members have with investing? "Compare that with your profile and see if it's a good match," says Eric Tyson, co-author of "Real Estate Investing for Dummies."

You also want to get a feel for what they can teach you. "What information do the other people have to offer?" says Poorvu.

And do the people in the club share your view of investing? "If they are there because they think they are going to make a million dollars overnight, it's probably not the club you want to be in," he says.

Even with the experts, always maintain a "high degree of skepticism," says Tyson. "Just because someone's coming to be a speaker at a club doesn't mean they are looking out for your best interests."

Savvy investing
One of the big pluses of joining a group is the chance to network. But just like any other system, there are some people who will try to take advantage of a captive audience. Effective groups keep the sales attempts to a minimum.

Occasionally, "we've had the situation where somebody tries to stand up and rattle off a quick sales pitch," Sklar says. In his group, a board member will take that person aside and talk to him.

You want to use the group as a sounding board and to learn from others. But you also need to balance that with information you're getting outside the group.

Some tips that can help:

  • Take everyone you meet with a grain of salt. Potential investors "need to talk to people they know have been successful, not people they meet for the first time who say they are successful," says NAR's Mansell.
  • Be careful who you consider an "expert." "One caveat I normally give people: Don't think just because one person in the group made some money on a real estate investment that they are a real estate expert," says Poorvu. "You don't know why they made the money."
  • If you feel like you are being pressured to spend money, buy products or use particular services or vendors, walk away.
  • Supplement what you learn in the group with outside information. Education is critical in real estate "because it's not an investment you can get into and out of quickly," says Martin Stone, co-author of "Secure Your Financial Future Investing in Real Estate." He recommends adult education classes at a local high school, community college or through a local apartment manager's association.
  • Several real estate investment experts also caution against any group investing opportunities. "I'm not as excited about people getting involved in group-type investments that may come out of clubs," says Stone, "because I think people are better off getting their education and setting their own goals for what they want to accomplish."

Think long term
Avoid clubs where members or speakers are focusing on strategies that seem risky. "If it's a get-rich-quick scheme, forget it," says Poorvu.

Mansell agrees. "'Get rich quick' doesn't work in real estate," he says. "It is usually a disaster. But real estate long-term is a wonderful investment and will probably grow your wealth better than anything you can do."

Have some questions? Move slowly, do your (independently corroborated) homework and get a separate evaluation from a Realtor, real estate counselor or real estate consultant. They can usually advise you as to whether a plan will work, says Mansell. To find one, contact local commercial real estate firms.

Clubs can be a great tool when it comes to learning about a new field. "When they work well, they can keep you from doing a lot of stupid things," says Tyson. "And you can come up with good ideas you wouldn't come up with on your own. It's a good way to meet people of similar interests."

And talking with someone who is an accomplished investor can be a great incentive, says Sklar. "You've read books about someone who's done it, but when you're sitting next to someone who's done it, that's motivation."

Dana Dratch is a freelance writer based in Atlanta.

-- Posted: April 22, 2005




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