“There’s still money in real estate”…. a statement made by many It sounds interesting, but all the same, you’re a bit confused by the ins and outs of the market. 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 investments.
Of course, you’ve seen countless ads 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’re set up by an investor who hopes to profit by selling services or investment strategies
There are many real estate investment options available in different banks to choose from. The National Real Estate Investors Association, a non-profit trade association, is a good starting place. 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.
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. If someone suggests a partnership, be as thorough as you would for any other business transaction.
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.
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.
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. 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.
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.
A bonus of incorporating is that the process requires you to write bylaws, or rules for the club. Even if you don’t plan to incorporate, it’s not a bad idea to have some rules. Bylaws clearly define the focus and operations of the club. They help avoid fuzzy concepts of how club business should be conducted and can spell out how dues will be allocated. They can also be a recruitment tool, since they let you show prospective members how the club works. You can look for sample bylaws and work collaboratively to draft and adopt its own bylaws
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