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How Real Estate Investment Clubs Work

Joining a Real Estate Investment Club
Widespread foreclosures and a slumping market might offer you an opportunity to scoop up investment bargains.
Widespread foreclosures and a slumping market might offer you an opportunity to scoop up investment bargains.
Justin Sullivan/Getty Images

There are many real estate investment clubs to choose from. Remember, real estate investment clubs are different from real estate investment trusts or REITs. You can use the Internet to find local clubs and resources, or join an online club. The National Real Estate Investors Association, a non-profit trade association, is a good starting place. The links at the end of this article also offer more directories and guidelines.

Be sure to think about what you want from a club. Support, information and motivation are common goals. But they're certainly not the only reasons to join.

Identify the real purpose of any real estate investment club you consider joining. Attend a few meetings before you pay dues. Ask questions about the group's founders and their motives for setting up the club. Did they want to invest and learn together, or did they want to sell their products? Find out who the members are and what they do. Think about whether what they offer matches your goals.

Some more questions to ask would be:

  • Is the club set up for education and networking?
  • Is the club for-profit or not-for-profit? Either structure can be legitimate, but you should know what you're getting into.
  • Will people making sales pitches for books, seminars or services hammer me?
  • Does the club focus on the kind of real estate I'm interested in?
  • How many serious investors belong to the club? Are they more experienced than I am, or are they mostly newbies? You're likely to learn more from experienced investors.
  • Have the club's investors done well with investments over time?
  • What are the dues? Most clubs charge between $50 and $200 per year. More than that could be the sign of a scam. But you should also take a look at the club's other sources of money. If the club receives a commission from speakers who sell products or services, then the information from those speakers might be biased. Slightly higher membership dues might mean that you can get unbiased information.

Investing in real estate is a big step to take alone. Sometimes club members form partnerships. A partnership might help you feel safer about your investment, or it might let you purchase more property than you could alone. But at least one advisor warns, "Watch out for sharks" -- people who promise to find you a deal in exchange for a chunk of the property's income [source: Carr]. If someone suggests a partnership, be as thorough as you would for any other business transaction. Get the person's references, and find out about his or her history and credit.

One real estate investor estimates that 95 percent of people who attend club meetings never invest, or give up after one or two tries [source: Weston]. It can be daunting to discover the amount of work ahead of you. But a club can keep you from facing that work alone.

What if you can't find a group? What if every group in your area turns out to be full of hopeful newcomers or smarmy salespeople? You might consider starting your own club. Find out how on the next page.