How Real Estate Investment Clubs Work

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:

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.

If you can't find a club you like in your area, you might consider starting a new real estate investment club. You can define the focus of the club and seek to attract like-minded members. You'll want to reach out to people who have expertise in different fields, but who are motivated to gain or provide knowledge about real estate investing. You'll also want to think about the professionals you might invite to speak at your meetings.

You can start the process by conducting research.

As part of your research, familiarize yourself with key real estate laws and current market conditions.

Once you have defined your mission and have a feel for what you want your club to offer its members, recruit people with expertise in real estate law, finance and accounting who can provide information lend their perspectives about potential real estate deals to the group. Figure out how the members will stay in touch. You also might want to create a monthly newsletter or an online discussion board.

You'll also need to think about how you want the club to grow. You can set up a website to market your club, or use local publications to recruit members. It's OK to start small. As your club provides value to its members, the membership is sure to increase.

Since money will be changing hands, think about incorporating to protect your personal finances. Decide whether your club will be a for-profit or not-for-profit entity. Each structure carries certain legal requirements and rewards. Your state's attorney general's office can provide more information about forms you must file.

Your group can elect officers such as a President and Secretary. Officers and members can help you decide how to manage dues, how often to meet, where to meet and how important decisions will be made. You might also want to create committees to find expert speakers, plan special events or seek out local real estate deals.

Whether you find a club or create one, embarking on the high seas of real estate investment can be a challenge. But it can also be rewarding -- and profitable. Stay alert and stay informed, and you should be all right. You can start by following the links on the next page.