How To Join A Real Estate Investment Group (and Pros & Cons)
You know the saying “strength in numbers.”–Well that’s the fundamental objective of starting or joining a real estate investment group (REIG). While it may seem intimidating at first blush, how to join a real estate investment group is pretty simple. The complicated part is deciding which real estate investment network you want to join. Luckily, you have this guide to hold your hand and walk you through the factors you must navigate when deciding.
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What is a Real Estate Investment Group?
A real estate investment group is a legal entity formed by a group of private investors who invest in real estate by pooling money, knowledge and time to purchase properties that generate income. Real estate investment groups’ structure come in many different forms, as they can invest in a wide array of real estate ventures that offer several varying channels to generate profits.
A real estate investment group may choose to buy, renovate, sell or finance properties in search of profits, and can choose to embody any entity structure, the two most common being partnerships and corporations. There are several ways real estate investment groups produce returns by investing in 1.) apartment buildings, 2.) rental property, or 3.) commercial buildings. It can also generate cash flow from mortgage lending or property management fees. Unlike real estate investment trusts (REITs), REIGs returns have no correlation to stock market performance.
Typically, they will buy or build a set of buildings, often apartments, then facilitate investors to purchase them through the REIG, thus joining of the group. As an investor and member of this group, you own one or multiple apartments in the complex. The REIG that operates the investment group; however, manages all the units and takes care of the maintenance and finding of tenants. In exchange for not having to get your hands dirty, the REIG takes a percentage of the monthly rent.
In the traditional model of group investing in real estate, the lease is in the investor’s name but, all the units pool a portion of the rent to guard against occasional vacancies, so an investor has enough money to pay the mortgage even if his or her unit is empty. The quality and security of the investment depends on the real estate investment group itself. While it is, in theory, a more secure way to purchase a real estate investment property, be weary of the group’s fees, as they could significantly cut into your profits. If they are above $200 monthly, this could be an indicator of a scam.
Real estate investment groups’ greatest value is in bringing together different people with varying areas of expertise, including real estate professionals and real estate agents, investment analysts, accountants, lawyers, closing specialists, and contractors–encompassing experienced investors, as well as new investors.
Real estate investing clubs used to be exclusively in-person, a group of five or ten investors getting together each month. With social media and the internet, however, there are just as many real estate investment clubs online where group members can meet and collaborate virtually.
Commercial Real Estate Investment Groups vs Residential Real Estate Investment Groups
The difference between Residential REIGs and Commercial REIGs is simply the real estate type and channel of revenue. Are you looking to generate revenue from individual tenets renting residential properties in which they inhabit or are you interested in generating revenue from businesses renting commercial properties?
Here’s How to Join a Real Estate Investment Group
Just about any individual investor can join a real estate investing group–the barrier of entry being, the investment of their money in the property. There are clubs for retired men and women, for college students, and for wealthy businessmen, as well as just groups that specialize in specific types of real estate or geographic areas.
It’s ideal to find a REIG with likeminded members. Here are some questions to ask while doing your due diligence in searching for the best real estate investment groups for you.
- What is the investment strategy of the real estate investment group? Are they looking for quick returns to increase capital or long-term passive income by holding real estate for 5 years or more?
- What historical data is the projected returns based on?
- What are the channels of revenue and on what cadence are club members distributed their returns?
- What is the REIG’s risk tolerance and is it aligned with yours?
- What is the process to withdraw your funds?
- What is the real estate investment group structure? Does each member has certain responsibilities. If so, what is the time commitment?
- Is the club set up for education and networking? Are the other investors more experienced than you are, or are they mostly newbies?
- What are the clubs dues?
Find Local Real Estate Investment Clubs Near You
If I were looking for a REI Club near me, I would start with the The National Real Estate Investors Association. Professional networking sites, like LinkedIn, are also a great way for me to see if people in my existing network are interested in real estate or even already belong to a real estate investment group near me.
The Pros and Cons of a Local Property Investment Group
Pros
- You are investing in the community in which you live
- The property or properties are actually accessible to you
- Club meetings can be in person and have a more intimate feel; it’s an opportunity to even expand your personal network, in addition to your professional network
Cons
- More limited pool of potential investors and experts
- Smaller group could require higher initial investment
- Lack of geographic diversity of portfolio presents higher risk
How to Find the Best Local Real Estate Investment Groups
If I were looking for real estate investment clubs near me in Miami-Dade Florida, I would dive deeper from your initial search on The National Real Estate Investors Association and delve into Broward Real Estate Association, which also encompasses the Fort Lauderdale Real Estate Association. If you’re a little further north, check out Central Florida Real Estate Investors. As I mentioned earlier, you can also find likeminded South Florida real estate investors on Linkedin and even other social media platforms.
I recommend attending a few meetings before you pay dues. Ask questions about the group’s founders and their motives for setting up the club, using the above as a general guide for important things to keep in mind when doing your due diligence.
Join a national real estate investment group
The Pros and Cons of a National Real Estate Investors Club
Pros
- Larger pool of professionals and skillsets to offer expertise
- Opportunity for more diversified investment portfolio
- More investors in the group offer opportunity for lower initial investment
Cons
- Larger groups from different parts of the country make it difficult to align
- Virtual meetings may feel impersonal and present communication difficulties
How to Find the Best National Real Estate Investment Groups
When looking to find the best national real estate investors group, an online search may seem like the easiest way, but the top search results for “group real estate investing,” or something of this nature, are often scams or for-profit companies looking to charge membership fees for you to use their name when forming your own group, not an actual REIG in which you want to invest.
So, we circle back to the trusted resource and trade association, the National Real Estate Investors Association (REIA). It holds monthly meetings, provides educational resources, and offers networking events. Not all are REIGs, but it will give you a starting point.
If you’re not concerned about the group being local and are searching for a larger, more established REIG, crowdfunding may be the better option for you. School of Whales is a real estate crowdfunding platform that invests in commercial real estate projects that leave a lasting positive impact on the community. You can become an investor for as little as $500 and have direct access to the properties for hard hat tours. When you invest with School of Whales you are buying shares of a diversified portfolio made up of multiple properties within South Florida. Crowdfunding platforms like School of Whales allow you to reap the benefits of real estate investing without the time commitment required by joining an REIG.
Start a Real Estate Investment Club Yourself
Pros
- You have the freedom to create the investment thesis according to your financial objectives and risk tolerance
- You define the monthly dues.
- You have the autonomy to pick and choose potential members to create the community culture you are looking for
Cons
- Naturally, there will be a significant time commitment
- You are assuming greater risk starting a legal entity that handles other people’s money
- If you are not a seasoned real estate investor, there will be a steep learning curve
How to Start a Real Estate Investment Club
Here are a few tips on how to form a real estate investment group:
- There is no such thing as an original idea! Learn about the purpose and structure of existing clubs.
- Attend a few meetings to get a feel for how they operate. See what you would like to emulate and what you would do differently.
- Consider what they offer their members not only in percentage of profits, but also educationally and socially.
- Find potential members on professional networking platforms like LinkedIn, as well as social platforms like, Clubhouse, Facebook and Instagram–Keeping in mind, you’re looking for people who have expertise in different fields, who are already successful real estate investors or who are interested in getting involved.
- Define your property investors group investment thesis and mission
- You can set up a website and social media accounts to market your club or use local publications to recruit members
- 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.
- Establish standard forms of communication: meetup in person, virtual meetings, newsletters etc.
While creating your own real estate investment group is a major undertaking, it can be rewarding, and most importantly, quite profitable. Again, leveraging other’s expertise is the major value added for REIGs, so you may even find an industry veteran who already knows how to form a real estate investment club and would be willing to partner.
Key takeaways
The real estate market is vast and having others to collaborate with, commiserate with and make money with can make it feel more manageable. When searching for the right property investment group for you, ask questions! Beware of for-profit companies poised as real estate investing groups, selling useless products and information to private real estate investment clubs. The best real estate investor groups aim to serve as a vehicle to not only make money, but exchange knowledge and leverage a vast arrays of expertise! Not convinced a REIG is for you? You should consider, real estate crowdfunding . Crowdfunding platforms like School of Whales allow you to reap the benefits of real estate investing without the time commitment required by joining an REIG.
Whether you choose crowdfunding, a national real estate investment network or a local real estate investment club, all are great opportunities to actually own real estate without taking on the burden of doing it on your own.