Real Estate Investment Clubs: Pros and Cons Analysis

Real estate investment is a reliable alternative investment to accumulate wealth. As a result, aspiring real estate investors are diving into the world of owning property investments. But, real estate investing can get intimidating. There is a lot to understand and real estate has unlimited jargon. And you are aware that there are scammers out there. So, you're probably wondering whether there's any way to learn more, meet some like-minded people, or even locate a more experienced investor to mentor you. Absolutely. Simply look for a real estate investment club. But, are they worth it? Let us look at the pros and cons.

What are Real Estate Investment Clubs?

Real estate investment clubs are merely a discussion platform for real estate investors, real estate professionals, and industry experts. These clubs consist of seasoned investors, novice investors, or a combination of the two. People join these clubs primarily to get information and expertise in real estate investment.

Real estate investment clubs often function in two ways:

• Independent solo investments: Independent investment is when a single investor purchases property on their own

• Group investments: Members of a group investment pool their money to invest in real estate. You may invest your money passively while others manage the business operations.

How do Real Estate Investment Clubs Function?

• As long as you can invest your own money, you can join real estate investment clubs. 
• Retired men, women, college students, and affluent businessmen can join these clubs.
• Real estate Investment clubs are less frequent than equities investment clubs. 
• Real estate investment clubs have five to ten members who share similar investing objectives. 
• There are zero legal restrictions or minimums.
• Members usually combine their money and make investing decisions collectively. 
• Real estate investment clubs can be casual gatherings.
• These clubs are frequently formed as partnerships. 
• Some clubs have their own declared goals. These might be value investments or income investing.
• Members of real estate investment organizations are entirely concerned with investing in real estate.
• Members of real estate investment clubs create a legal entity. This guarantees that each member has a stake in the company. When the club agrees to acquire or sell real estate, its name is written on the deed.
• The majority of real estate investing clubs have established operating procedures.
• In most circumstances, officers will be elected. Members will also be assigned specialized tasks. Sales execution, record keeping, taxes, property upkeep, and member communications are some examples.
• Members used to gather in person to debate and vote on properties. These decisions are now frequently made by email or online chat. The internet also makes it easy to locate local real estate investment clubs. 
• To join the club, members may have to pay a charge. A monthly or annual fee may also be charged to pay expenditures.

Pros Vs Cons: Real Estate Investment Clubs

Read about these in detail below.

Pros of Real Estate Investment Clubs

Now that we know what real estate investment clubs are and how they function, let us understand the pros of joining them.

• Financial Resource Pooling: An individual investor would most likely be restricted to investing in homes that you could qualify for on your own. This may preclude you from investing in pricey but successful commercial real estate, for example. Your money might be utilized as a part of a bigger pool of funds for investments in homes you couldn't afford on your own if you join a real estate investment club.

• Risk and responsibility sharing: As an individual investor, you are responsible for all decisions and risks. You will share those obligations as a member of a real estate investment club. You'll also be able to share ideas and thoughts with one another, which will help you make better decisions.

• Networking: Investing clubs fosters opportunities for networking. Most club meets happen once every month. It enables members to socialize for about an hour before the actual meeting starts. This is the moment to connect with mortgage brokers, attorneys, fellow investors, contractors, and mortgage brokers. Networking at such events will expand your contact network, which will help you discover deals in the long run. Meetings of Investment clubs are an excellent approach to rapidly expanding your network.

• Education: Most sessions feature a guest speaker. They might talk about the advantages of LLCs to a new credit product. They possess information that you can use for your investing. This will prepare you to converse with investors and business associates.  Real estate investment clubs are the ideal setting for this.

• Experience of Real-World: Attending meetings of investment clubs is having the opportunity to engage with people. These people close deals in your region. Listening to the experiences of other investors will teach you many things. It can help you save money and time. Surrounding oneself with business people is worth the fee you pay.

• Deals: Attending meetings has a straight return as well. You never know when an attorney, real estate agent, mortgage broker, or fellow investor with transactions is suitable for you if you cultivate connections with them. If you attend enough meetings, real estate agents may finally have an affordable deal in a certain region. If you surround yourself with enough people, deals will ultimately find you. Real estate investment clubs may not guarantee transactions, but they do boost your prospects significantly.

Cons of Real Estate Investment Clubs

• Scams: There have been several reports of investors losing millions of dollars in fake clubs. It is therefore critical to conduct thorough research before joining a club. Conduct an extensive study on the organization and its executive team.  If you see any red signs, immediately walk away without looking back.

• liquidity: Once you have contributed money to purchase assets, recovering it may be difficult. Your money might be locked up for years and give a very low return on investment. As a result, learn about the procedure of leaving.

• Personality clashes: Because members of an investing club have various personalities, their perspectives are likely to clash. As a result, reaching an agreement on critical matters may be difficult. This may result in the loss of prospective investment opportunities along the road.

• High membership fees: In addition to the yearly membership price, some investment clubs demand members to invest a large sum of money or purchase expensive courses when they join. Such expenses will eat into your budget and profit.

• Continuous Investment Needs: Even after you have met your initial duties, you may incur further charges as a club member. As a member, you will be required to pay your full part. If you join a club where the properties have significant maintenance requirements, your cash flow and profitability may suffer.

• Less flexibility: Clubs' collective nature also implies a lack of flexibility for each member. Assume you need money suddenly and want to sell some shares. You would need the backing of other members of the organization, or another member would have to buy you out.

How to Locate Real Estate Investment Clubs?

Have you made the decision to join real estate investing clubs? If yes, how can you locate legitimate real estate investment clubs?

• Google the name of your state or city along with the words' real estate investment club' or 'real estate investing group'. 
• You might also go on MeetUp.com or LinkedIn to see if your region has any real estate investment clubs.
• Search for a local chapter of the NREIA or National Real Estate Investors Association. 

Bottom Line

You should now have a better sense of what to expect from joining a real estate investing club. As a result, you can determine whether joining one is consistent with your investing strategy for meeting financial objectives.

At the very least, this investment choice may assist you in expanding your knowledge of real estate investing. And assist you in accumulating enough equity to someday begin purchasing rental property on your own.

Do you want to learn more? Or are you seeking means to manage your assets without becoming a member of real estate investment clubs? Working with reliable alternative investment platforms, such as Assetmonk, may simplify and increase the profitability of real estate investing. Assetmonk offers a number of real estate investment options, including complete due diligence, open reporting, and trustworthy property management.

Related Articles

1. What is SFR in Real Estate Investing?
2. Investing in Peer-to-Peer Lending.

FAQs

Q1. Are investment clubs a good idea?

A. Investment clubs may assist people to learn about prospective investing techniques and goals. Some investment clubs pool their funds, which might assist individuals in becoming a part of a coherent investing plan.

Q2. What does an investment club do?

A. Real estate investment clubs are merely a discussion platform for real estate investors, real estate professionals, and industry experts. These clubs consist of seasoned investors, novice investors, or a combination of the two. People join these clubs primarily to get information and expertise in real estate investment.

Real estate investment clubs often function in two ways: Independent solo investments or group investments.

Q3. What are the disadvantages of investment clubs?

A. The disadvantages of investment clubs are: 

• liquidity: Once you have contributed money to purchase assets, recovering it may be difficult. Your money might be locked up for years and give a very low return on investment. As a result, learn about the procedure of leaving.

• High membership fees: In addition to the yearly membership price, some investment clubs demand members to invest a large sum of money or purchase expensive courses when they join. Such expenses will eat into your budget and profit.

• Less flexibility: Clubs' collective nature also implies a lack of flexibility for each member. Assume you need money suddenly and want to sell some shares. You would need the backing of other members of the organization, or another member would have to buy you out.

Q4. Can investment clubs charge fees?

A. For the registration of any document of transfer, the Investment Club may impose a fair fee.

Q5. How many members can an investment club have?

A. Most investment clubs have 10- 20 members.