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, joining a real estate investment group is actually quite simple. The tricky part is deciding which real estate investment network to join. Luckily, this guide will walk you through the factors you need to consider when making your decision.
What is a Real Estate Investment Group?
A real estate investment group is a legal entity formed by a group of private investors who pool their money, knowledge, and time to invest in real estate and generate income. These groups can take on various structures and invest in different types of properties, such as apartment buildings, rental properties, or commercial buildings. They can also generate income through mortgage lending or property management fees. Unlike real estate investment trusts (REITs), the returns of real estate investment groups are not correlated to the stock market.
Typically, a real estate investment group will buy or build a set of buildings, usually apartments, and allow investors to purchase them through the group. As an investor and member of the group, you own one or multiple apartments in the complex. The group, known as the REIG, manages all the units, takes care of maintenance, and finds tenants. In return, they take a percentage of the monthly rent.
Commercial Real Estate Investment Groups vs. Residential Real Estate Investment Groups
The main difference between commercial and residential REIGs lies in the type of real estate and revenue channels. Commercial REIGs generate income from businesses renting commercial properties, while residential REIGs generate income from individual tenants renting residential properties.
Here’s How to Join a Real Estate Investment Group
Joining a real estate investment group is open to any individual investor willing to invest their money in the property. There are groups for retirees, college students, and wealthy businessmen, as well as groups that specialize in specific types of real estate or geographic areas. The key is to find a REIG with like-minded members who share your investment goals.
When searching for the best real estate investment group for you, consider asking the following questions:
- What is the investment strategy of the group? Are they focused on quick returns or long-term passive income?
- What historical data do the projected returns rely on?
- What are the revenue channels, and how often are returns distributed?
- What is the group's risk tolerance, and does it align with yours?
- What is the process for withdrawing your funds?
- How is the group structured? Do members have specific responsibilities, and what is the time commitment?
- Does the club offer education and networking opportunities? Are the other investors more experienced or mostly beginners?
- What are the membership dues?
Find Local Real Estate Investment Clubs Near You
To find a local real estate investment club, start with trusted resources such as The National Real Estate Investors Association. You can also use professional networking sites like LinkedIn to see if people in your existing network are interested in real estate or already belong to a local investment group.
The Pros and Cons of a Local Property Investment Group
Pros:
- You are investing in your own community.
- Accessible properties within your reach.
- In-person club meetings for a more intimate experience and the opportunity to expand your personal and professional networks.
Cons:
- A more limited pool of potential investors and experts.
- A smaller group may require a higher initial investment.
- Lack of geographic diversity in your portfolio presents higher risk.
How to Find the Best Local Real Estate Investment Groups
If you're looking for real estate investment clubs near you, delve deeper than just a basic online search. Explore associations like the Broward Real Estate Association in Florida or Central Florida Real Estate Investors. LinkedIn and other social media platforms can also help you find like-minded South Florida real estate investors.
Before paying dues, attend a few meetings to get a sense of the club's founders and their motives. Ask questions and use the criteria mentioned earlier as a guide during your due diligence.
Join a National Real Estate Investment Group
Pros:
- Access to a larger pool of professionals and skill sets.
- Opportunity for a more diversified investment portfolio.
- More investors in the group offer the chance for a lower initial investment.
Cons:
- Difficulty aligning with larger groups from different parts of the country.
- Virtual meetings may feel impersonal and present communication challenges.
How to Find the Best National Real Estate Investment Groups
Finding the best national real estate investment groups can be challenging due to online scams and for-profit companies. Instead, turn to trusted resources like the National Real Estate Investors Association (REIA). While not all REIAs are REIGs, they provide valuable starting points for your search.
If you're open to a larger, more established REIG but not necessarily local, consider real estate crowdfunding platforms like School of Whales. These platforms allow you to invest in commercial real estate projects in South Florida with as little as $500 and offer direct access to properties for hard hat tours.
Start a Real Estate Investment Club Yourself
Pros:
- Freedom to create an investment thesis that aligns with your objectives and risk tolerance.
- Autonomy to set monthly dues.
- Ability to choose potential members and create the community culture you desire.
Cons:
- Significant time commitment.
- Greater risk when handling other people's money.
- Steep learning curve for inexperienced investors.
How to Start a Real Estate Investment Club
Starting your own real estate investment club is a major undertaking but can be rewarding and profitable. To get started:
- Learn about the purpose and structure of existing clubs.
- Attend meetings to understand operations and identify areas for improvement.
- Consider what existing clubs offer their members beyond profits, such as education and networking opportunities.
- Use professional networking platforms like LinkedIn and social platforms like Clubhouse, Facebook, and Instagram to find potential members with expertise in different fields or who are successful real estate investors.
- Define your investment thesis and mission statement.
- Set up a website and social media accounts to market your club or use local publications to recruit members.
- Decide on the club's legal structure, whether for-profit or not-for-profit, and comply with legal requirements.
- Establish standard forms of communication, such as in-person meetups, virtual meetings, or newsletters.
While starting your own real estate investment group requires significant effort, the benefits of leveraging others' expertise can be invaluable. You may even find an experienced industry veteran willing to partner with you.
Key Takeaways
The real estate market can feel overwhelming, but collaborating with others can make it more manageable and profitable. When searching for a property investment group, ask questions and be cautious of scams posing as legitimate groups. The best real estate investment groups aim to facilitate both financial gains and knowledge exchange among members.
If joining a REIG doesn't appeal to you, consider real estate crowdfunding platforms like School of Whales, which allow you to invest in commercial real estate without the time commitment of an REIG.
Remember, whether you choose crowdfunding, a national real estate investment network, or a local investment club, these opportunities allow you to own real estate without the burden of going it alone.
Resources:
- National Real Estate Investors Association
- Broward Real Estate Association
- Central Florida Real Estate Investors
- The Balance: Guide for Real Estate Investment Clubs
