Should You Join an Investment Group?

There's strength in numbers. This is the basic premise behind joining an investment group, and there's a fair bit of wisdom in that set of statements. Real estate investment clubs exist to pool the resources of multiple investors into projects of mutual interest. They also provide an opportunity to talk to like-minded investors, and to share experiences, opportunities and tips. Think of it like this – when you find a property that isn't right for you, but would be right for someone else in the club, you're doing them a favor; most clubs are predicated on mutual benefit.

Real estate investment clubs aggregate information sources. What one person brings to the club, lots of other people can benefit from. What one person learns the hard way, the rest of the club learns how to avoid, meaning they aggregate experience as well. Investment groups also aggregate negotiating power and purchasing power, by providing a venue where investors can pool their capital to a mutually beneficial project.

Use your investment group to gather information about neighborhoods, about builders, and about funding sources. A good investment group will help you generate a portfolio of developments to choose from and work towards, and will often have seminars and classes you can learn from, as well as being a powerful source of negotiations. Fellow members of an investment group can make useful partners when acquiring a property, or can team up to buy adjacent properties and help run them to mutual benefit.

This isn't to say a real estate investment club is the be-all and end-all. Investment groups carry a lot of inertia as organizations. A group of people reaching a consensus on a decision cannot make decisions with the same agility as an investor working on his own. This manifests itself in divided objectives, and often times in purchase delays as everyone wants to dip their oar into the water and offer direction.

Not all investment groups are good for all investors. Ask each real estate investment group you're considering what their charter is, and what type of real estate investments they're looking to work on. Be it commercial, retail, residential or construction related, most investor business groups focus on one or two things and do them well. This is fine if it's what you're interested in focusing on, but can cause a lot of stress and strife if the group's goals and mission statements differ from your own.

Some investment groups focus on free benefits – classes, seminars, maps, and investing tips, or incentive programs for group buy-ins on common equipment, or discounts on common software. These are good reasons to join an investment group, but be on the lookout for some signs that an investment group has turned into a "private market" for some members to sell goods and services to other members, or to funnel business to certain builders and contractors. It usually starts out with good intentions, but "I stopped showing up because someone was always trying to sell me something" is the number one reason why people stop going to investor club meetings.

So, before joining an investment group, take the time to ask yourself some questions. First of all, are you a consensus builder, or an iconoclast? Both styles of management and investing work, but obviously, the first works better with an investment group than the second. (Though the second has its place in an investment group – every group needs someone to play the devil's advocate and bring people down to earth on investment prospects.)

Next, ask yourself what the group was founded to do, and how it does it. What's the makeup of its membership? Are these people you'll respect, and like? Was it founded by other real estate investors looking to pass on their knowledge, or the infamous "video tape salesman" founder, who has a business plan to sell and classes to huckster? You can get good information out of investment clubs built the latter way, but it's a chancier affair.

Finally, ask to look over the minutes of the last couple of sessions of the club, or ask if you can go to the first couple of meetings before you pay any kinds of dues or membership fee. You should expect that a club of this sort is a place to mingle, to talk to other investors, and to swap information in a collegial manner. The club should have a bulletin that you can look at, and you should be able to trade information there about properties that interest you, vendors, contractors and the like. Don't turn a club down just because it's got ties to a vendor or contractor – that's one way to keep dues down. Do be aware that you're going to be getting information that may be skewed in favor of the sponsor.

If you do decide to join an investment club, historically, they've proven to be a strong competitive advantage when compared to the independents. They provide a forum for sharing knowledge, a way for investors to leverage their resources and buy multiple lots in investment properties for a group price, and can give you sound advice as you're starting out in a career in commercial real estate investing.

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