Why Most People Who Go To Real Estate Investment Club Meetings Never Invest In Real Estate
A little while ago Maverick Investor Group conducted an experiment to test a particular market—“people who attend real estate investment club meetings”—to see what percentage of them were actually interested in purchasing investment real estate.
We hosted a private real estate buying opportunity via webinar. It was an awesome deal for turn-key residential rental properties—all unlisted, all at special prices and terms not available to the public, hot market, our usual thing, Maverick style—exclusively for members of real estate investment clubs around the U.S. I will outline the experiment, followed by the results and then provide some analysis.
THE EXPERIMENT:
To control variables we hosted a buying opportunity that offered investment properties with prices and terms identical to previous buying opportunities that our real estate investor clients had responded to favorably, purchased and closed. We also used the same medium (Webinar) and the same presentation. So, all of those variables were held constant. The goal was to have the only new variable be the source of the buyer prospects: real estate investment clubs.
We contacted all the real estate investment clubs in the country that we could find online. We reached out to all of them by phone and email. For the ones we could get a hold of we offered the president of the club a flat fee to send an email blast to their list (selling email blasts is one of the ways real estate investment clubs make money) and we paid their market rate. Every real estate investment club that responded was paid to send out an email blast inviting their list to register for the webinar. And by the way, the event was clearly billed as a ‘buying opportunity’, not disguised as an educational event with a hidden up-sell at the end.
THE RESULTS:
1) Over 200 People from various real estate investment clubs around the country registered for the Webinar.
2) Nobody Purchased a Property. Not a single one. Not even after a full week of follow up. 0 out of 200.
Those are compelling results. They are further supported by the fact that I have personally attended many real estate investment club meetings over the years and I have never once met a single attendee that has ever closed on a property through Maverick. It is pretty astounding given that the name of the venue is ‘Real Estate Investment Club’, but that just further begs the all important question of ‘Why’.
The answer is crucially important, especially for novice investors to understand. You won’t see many experienced real estate investors, or affluent people in general, at real estate investment club meetings…..and there is a reason for that.
THE ANALYSIS:
The reason why most people who attend real estate investment club meetings never invest in real estate is not actually that complicated of mystifying. It is pretty simple and clear if you understand the basic economics and underlying incentive structures of real estate investment clubs.
1) Real estate gurus are not in the business of real estate investing; they are in the business of selling educational products and seminars. Most real estate gurus who are featured speakers at real estate investment clubs market hopes and dreams about getting rich through real estate. This is typically targeted to a non-affluent audience, and typically takes the form of Do-It-Yourself (DIY) education (home study courses, CDs, seminars, etc). Selling these education products to real estate investment club attendees is how the guru makes money. That means that the prospect of someone actually investing in real estate is perceived as ‘competition’ for the guru because if someone were actually to use their money to invest in real estate, there would be less money available to pay for the ‘extra-special-super-seminar’ into which the guru is hoping to up-sell the client after they buy the gateway product.
That may shed some additional light on why so many gurus like to promote ‘no money down’ strategies:
a. Their audience at the real estate investment club doesn’t have much money
b. They want you to put all your money in their pocket instead of putting it ‘down’ on real estate.
2) Real estate investment clubs are not in the business of real estate investing either. Real estate investment clubs are in the business of helping real estate gurus (and related self-styled ‘industry experts’ of various stripes) sell their products to novice would-be-investors (the real estate investment club takes a sizeable cut), and in the business of selling memberships and advertising/vendor tables. Most of the real estate investment clubs do not have a real estate broker’s license and cannot legally receive referral fees on real property transactions, but they CAN receive commissions on educational products sold. So there is a financial self-interest in encouraging people to buy the educational products instead of investing in real estate.
CONCLUSION:
When you unveil the underlying financial incentive structure, it becomes pretty clear why most people who attend real estate investment club meetings never invest in real estate…..at least not until they figure out the game and seek real estate investment opportunities elsewhere.
WHAT DO YOU THINK?
Let’s get the dialogue going. In the comments below, let us know what your experience has been with real estate gurus, real estate investment clubs, and actual real estate investing.
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