The real estate investment club idea of ownership
- Tue 10 Sep 2019
You may have heard there is still money in the real estate market. Is there a way to learn more by mingling with some like-minded people, and perhaps find a more seasoned investor to mentor you? Absolutely yes! Just find a real estate investment club. It is one of the smart ways of getting into the property ladder. This article will tell you how it works, whether by joining an existing one or how to set up your own. Please don’t mix it up, this is not a corporate society or a real estate investment trust. It is a club.
You might be familiar with the stock investment club model, in which members pool their money to buy stocks and bonds. In a real estate investment club, you don’t typically collaborate on investment. Instead, members come together to network, gain knowledge about investment practices, get hot tips about available commercial or rental properties, become familiar with laws and regulations, and understand market trends and how to profit them and trade information about vendors for property improvements and services. They also come together to get the advice of legal and financial professionals, learn from guest speakers and find a supportive group of like-minded individuals with common goals. Of course you have seen countless advertisement for books and seminars promising to tell you how to make millions now in real estate. Some clubs are little more than thinly veiled plugs for these services. They are set up by the investor who hopes to profit by selling services or investment strategies. Now, this seminar may indeed have something to teach you. But is it what you want to learn? This article will not teach you how to make millions now, But it will tell you what you can expect from a real estate investment club, how to find the one that is right for you and when it might be a better option to start your own.
JOINING A REAL ESTATE INVESTMENT CLUB
There are many real estate investment clubs to choose from. Remember, real estate investment clubs are different from real estate investment trust or REITs. There are a couple of real estate investment clubs here in Lagos and you can search online to get contact details of some of them. However be sure to think about what you want from the club – support, information and motivation are common goals. But they are certainly not the only reason 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, or did they want to sell their product? Find out who the members are and what they do. Think about whether what they offer matches your goal. Some more questions to ask would be, is the club set up for education and networking? Is the club for profit or non-profit? Either structure can be legitimate, but you should also know what you are getting into. Also ask, does the club focus on the kind of real estate am interested in? How many serious investors belong to the club? Are they experienced than i am, or are they mostly newbies? You are likely to learn more from experienced investors. Have the club’s investors done well with investments over time? What are dues? Most clubs charge between #50,000 and #100,000 per year. More than that could be the sign of scam, But also take a look.
“Investing in real estate alone is a big step to take. Sometimes club members form partnership. A partnership might help you feel safer about your investments, or it might let you purchase more property than you could alone”
At the club’s other source of money. If the club receives a commission from speakers who sell their products or services, then the information from those speakers might be biased. Slightly higher membership dues mean that you can get unbiased information. Investing in a real estate alone 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 an advisor warns, “Watch out for hole”. Now, what if you cannot find a group? What if any group in your area turns out to be full of hopeful new corners or rookies? You might consider starting your own club.
HOW TO START YOUR OWN REAL ESTATE INVESTMENT CLUB
If you cannot find a club, 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 will want to reach out to people who have expertise in different fields, But who are motivated to gain or provide knowledge about real estate investment. You will also want to think about the professionals you might invite to speak at your meetings. You can start the process by conducting research. Learn about the purpose of structure of existing clubs. Attend a few meetings to get to feel on how they operate. Consider what they offer their members. Decide how you want your club to be similar to and different from the one you research. Jot down ideas and activities that seem worthwhile. 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, learn their perspective about potential real estate deals to the group. Figure out how the members will stay in touch. You will also need to think about how you want the club to grow. You can set up a website to market your club, or use popular publications in town to recruit members. It is 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 for profit or non-profit entity. Each structure carries certain legal requirement and reward. Your group can elect officers such as a president and secretary. Officers and members can help 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 or real estate investment can be a daunting challenge. But it can also be rewarding and profitable. Stay alert and stay informed, and you should be alright.
A bonus for incorporating is that the process requires you to write byelaws, or rules for the club. Even if you don’t plan to incorporate, it is not a bad idea to have some rules. Byelaws clearly define the focus that operations of the club must follow. They help avoid fuzzy concept of how club business should be conducted and can spell out how dues will be allocated. They can also be source recruitment too, since they let you know prospective members and how they work. You can look for sample bylaws and work collaboratively to draft and adopt your own byelaws.