Here’s a cautionary tale for everyone out there . . .
I recently attended a real estate investing club meeting and was absolutely shocked and angered by what I heard and saw. If you want to find out about what an investment club shouldn’t be doing, then read on.
Lack of Real Estate Education
I think at most 10 minutes of the meeting were used for investor “education.” The education involved a lecture on identifying good real estate markets to buy property in, a review of the basics from Rich Dad/Poor Dad, and some small talk about the value of attending real estate classes at a particular school. When discussing good markets to purchase property in, the speaker informed the group that the best time to buy was before the market started to appreciate and the time to sell was just before the top of the market. While this dazzling display of genius makes sense, they completely ignored all of the opportunities that present themselves at every other point in a market’s cycle. Investors can make money in ANY point in a real estate market cycle! They just have to know what they are doing! In addition, he never explained to anyone how to identify the bottom and top of a market, probably because neither he, nor anyone else can perform such a task with the ease that he presented. If it were as easy as he claimed there would be some people out there that make Buffett and Gates look like paupers.
As for the rest of the education, regurgitating Robert Kiyosaki for 2 minutes is not really what I call a great way to teach. I learned that if I work for someone else I’ll never get rich . . . it was very enlightening (smell the sarcasm?). This is not to knock Kiyosaki, but what was shared in our little meeting was rather weak.
Nothing but Sales Pitches
Through the course of my time at the meeting there were 2 people who spoke: the man I assume was running the show (“the lecturer”) and a man who was there to share with us the wonders of investing in Mexico. This guy talked for close to an hour about getting involved in a project he seemed to be running. There were presentations and more presentations. As the drool was falling from my barely conscious head, I awoke to something quite startling. In talking up the benefits of investing in Mexico, he mentioned that the US government didn’t need to know about such deals, and went on to let people know that he’d be available to discuss this in a one on one setting if anyone was interested in finding out more. Like a fly on the wall I sat there taking this in. This guy was talking to a group of people who he might have known (he certainly didn’t know me), and was essentially selling them on investing in Mexico because amongst other things, “the US government didn’t need to know.”
I was further surprised when he started to tell us that he preferred not to work with contracts. Basically, it sounded like he was telling people to invest their money with him with nothing in writing (because he only works with people he knows). That may work well for him, but I hope that no one EVER goes into a deal with anyone without something in writing. That is a quick way to losing your money. The guy was trying to sell the group on being “passive investors” (those who simply give their money to someone else to deal with), and equated everyone else as having a “real estate job” (which, following from the Rich Dad lecture made it sound ugly). He essentially said that he was like a stockbroker . . . you give him your money and in a pre-determined period of time you will be able to collect your gains. I’ve got a contract with my stockbroker (at least I did when I used one), and there is no chance I’m going to get into a real estate deal with ANYONE without a contract.
I’ve got to tell you that the whole thing sounded great. If I had no idea what I was doing, I may have fallen for the pitch, but I hope no one reading this, or anyone else, does.
The entire meeting was essentially a sales pitch for this “project.” When I quietly asked the guy next to me if all the meetings of this group were sales pitches, he responded that they were.
Overall Lessons Learned
NOTE: Not all real estate investing clubs are like this!
Real estate investing clubs should be places where members can learn, meet new people, network, and find out about deals. They should not be places where “members” are lectured to or pitched for an entire meeting. They should not be places where the only time devoted to education is spent on bad education. They should not be places where the best advice given is to not report foreign real estate transactions to the government.
If you have been to a meeting of an investment club that does this, you need to quickly find yourself another group to meet with. You’re doing yourself a disservice by sticking around.