At this point, we have talked about the different types of real estate investors you’re likely to find at your own real estate investor group meetings and why, I believe, you should start and run your own group. At times, we talked about how you can monetize working with real estate investors that come to your club, but mostly we discussed earning commission income.
I believe that commission income is the largest source of income and the one I use primarily in my business to earn hundreds of thousands of dollars per year, but there are other models and other opportunities to monetize the investor group. You may choose to utilize some or all of these additional strategies. Or, like me, you may decide to focus on providing your brokerage service to real estate investors at your group and forgo other monetization models.
- Commissions from real estate investors buying and selling properties
- Deals from bird dogs and wholesalers (for yourself and maybe your clients)
- Referrals of retail sellers from bird dogs, wholesalers, and other investors
- Partnership opportunities
- Hard money loans (brokerage fees and/or interest/points)
- Advertising
- Joint-ventures with professional speakers
- Selling your own coaching, consulting, mentoring, and other services
- Selling your own products
- Dues
- Donations
- Sale of group
Let’s go through each one and look at it in more detail.
Commissions
This is the primary means I use to make starting and running my own real estate investor group worthwhile. The group and classes are free, but a large enough percentage of the people that attend the group decide to buy and sell properties with me that it’s worth it.
Deals
If you invest the time to develop a relationship with bird dogs and wholesalers that come to your real estate investor group, you can usually pretty easily get on their buyer’s list so they’ll bring investor-grade deals to you when they find them. If you are interested in buying deals yourself to buy, fix up and resell or buy and hold, this could be an additional source of deals for you. Imagine running your own investor group and having 4 bird dogs or wholesalers bringing you a single deal each year. That could be 4 deals a year and if your average deal is $30,000 profit that could be a $120,000 per year source of revenue from a very achievable set of assumptions.
Retail Seller Referrals
Recall our discussion about bird dogs and wholesalers. Bird dogs and wholesalers are looking for investor-grade deals. Typically, only 1 in 10 sellers will be a deal that will be investor-grade and worthy of bird dogging and/or wholesaled to an investor buyer. That means that there are 9 sellers out of 10 that have expressed an interest in selling their property but are not willing to sell at a discount large enough for an investor to be interested.
What do bird dogs and wholesalers do with the 9 sellers that are not interested in their offer? Well, if you want to focus on this in your business, they could refer them to you. You could follow up with those sellers about listing their properties for sale and helping them buy a replacement property.
How you decide to structure this and what fees, if any, you decide to negotiate with the bird dogs and wholesalers is up to you. While I occasionally get these leads without trying, it is not something I focus on. My brokerage business is 90% helping investors buy properties and only 10% selling properties. That may change in the future as the market shifts and my client’s goals change, but for now I am not trying to lose my focus on my primary business.
It occurs to me as I write this, that maybe I should bring another real estate agent into our business to focus solely on these listings and either co-list them or get a referral fee on them. I’ll add it to the list of things to consider implementing when time permits (which even I know means I probably won’t get to it anytime soon).
Partnerships
When you start and run your own real estate investor group, you will inevitably get real estate investors coming to you with deals that they would like help with. In some cases, they are looking for someone with more experience to help them and sometimes they’ll offer to partner with you on deals. I have personally partnered with some of our investor club members on deals, but it is the exception and not the rule.
Personally, I am super careful about who I’d be willing to partner with as one bad deal with a group member could tarnish my reputation and prevent me from generating the brokerage business I do from the group. In my meetings, I largely let the other group members promote me during networking parts of the meetings. It is far more valuable to have a client or partner tell a newer member about why they should work with me than it is for me to shamelessly self-promote. An unhappy partner could do far more damage than I am likely to make with a partnership.
I’ve done partnerships where I’ve consulted with clients on how to do deals for a fee. I’ve done partnerships where I was a broker for the transactions (at time of purchase and time of sale). I’ve done partnerships where I invested money. I’ve done partnerships where we started new companies to do a number of deals. I’ve partnered on single family homes to 100 unit apartments. Each one is unique. So, the options and opportunities are diverse and plentiful.
Hard Money
As a group organizer, you’re going to meet hard money lenders. Hard money lenders will seek you out and tell you they have money to lend. If you’re looking for money yourself, you will have plenty of opportunity. If your clients ever need hard money for their deals you’ll have contacts with a variety of programs and terms to direct your clients to.
If you wanted to check the licensing requirements and get the proper license you could broker hard money between the hard money lenders and investors that need hard money. At one point, I did have a license to be able to do this for many years, but opted to turn my license in and not renew it since it is not really my area of focus.
Should you want to loan out money as a hard money lender yourself, there will be opportunity for that as well. Many real estate investors will come to you after class with a deal asking if you know where they can get financing from. Refer them to hard money lenders you know, broker it yourself (with proper licensing), or fund the deal yourself with your own money.
Advertising
When you start and run your own real estate investor club, you are the owner of the toll bridge and people will pay you to gain access to your members.
I’ve been approached by numerous people over the years wanting to advertise to my group members. You could opt to accept advertising to reach your members. Some groups charge businesses to be able to place flyers on the seats for classes. So, a hard money lender, mortgage broker, property management company, self-directed IRA companies, software package provider, or anyone else who wants to reach your real estate investor group might pay you a fee to have flyers delivered to all your group members for a particular class. Some groups set up booths at each of their meetings for vendors to display for a free. Some groups allow advertisers to advertise on their websites for their members. Opportunity for advertising abounds and could more than cover the cost of running the group.
Speakers
Eventually, you’re going to get calls from professional speakers who want to come and present to your real estate investor group. Sometimes these are law firms, accountants, mortgage brokers, other real estate agents, or property managers wanting to give a free presentation to your members. If you have them come in to talk, they’ll want to promote themselves and what they can offer as part of the presentation. Sometimes, they might want to sell a product or service right in front of the room when they’re presenting. It is extremely common for them to offer you a percentage of everything they sell at your group. Receiving 50% of the sales produced is very common.
For some real estate investor groups, this is the primary reason and money-making strategy for running a group. I’ve personally never allowed this at my group. I might in the future, but haven’t felt the need to do it yet.
Coaching, Consulting, Mentoring and Other Services
In addition to brokerage services, maybe you would also considering offering coaching, consulting, mentoring, or other services. I get asked about this a lot, so I know there is a need. If I wanted to, I could put together a package to offer to my group members and use this a source of revenue from running the group. Instead, I tend to tell folks, if you’re buying a home with me, I’ll work with you and I’ll get paid a brokerage fee (usually from the seller so it is no additional out of pocket cost to you).
At one point in my brokerage, I did charge a retainer to work with me where I charged you for hourly work I did for you. When you bought a property, I applied all the money you paid me hourly as a credit toward the commission. In the end, my clients almost always paid the same commission they would have paid, but how I was paid was very different. I was paid up-front and hourly as I did work for them. Then, we settled up at the end. It is possible, if they were really high need, that they could have paid more than the commission, but no one ever did.
When I was charging a retainer and doing work for them, I considered that paid consulting. When they eventually bought a house, the amount they had paid for consulting was credited back to them and really all I earned was the commission.
Selling Your Products
If you decide to teach your own classes, you’ll inevitably come up with amazing content that is valuable and desirable to your real estate investor members. You could decide to present the classes for free, but anyone who misses it can purchase the recording from you. Or, you could put together a longer, more comprehensive version where you charge for it. Some groups might do a one hour class during the week that’s free, but the full day workshop on Saturday is $500.
In my group, I am really focused on brokerage business. I consider the classes as opportunities for me to save time. If I don’t have to sit down one-on-one with a client to go over tenant screening or how to analyze deals, I consider that a huge win. I’d rather teach the best stuff I have to all my clients and potential clients up front. I also record it. Then, I make the recordings available to the clients and potential clients. If we just taught a class on deal analysis the week prior to a new member joining the group, I don’t want to have them wait until next year when we teach that class again; I want them to get the info they need to be ready to buy so I give them access to the class recording.
You could opt to charge for access to the recordings. I have in the past for certain classes, but don’t currently in my business.
Dues
Some real estate investor groups charge dues to be a member. Some clubs might charge $197 for a year-long membership. Often, they make the first meeting free so you can see what you’re getting. After that, you need to either become a member and pay, or pay, let’s say $20, to attend each meeting if you’re not a member.
Imagine having 100 members paying you $197 per year to be a member. That’s $19,700 per year in membership dues. Our club, as of the of this writing, has just over 900 members.
Believe it or not, I have clients that have paid me tens of thousands of dollars in commissions… one in particular easily over $100,000 in commissions… that are not willing to pay membership dues. So, weigh heavily whether you’re going to insist on membership dues.
For me, I did some math. I said, if I get one person that would not have paid memberships dues but that buys a house with me and I earn $9,000 I would have needed about 46 members paying dues to make up for that ($9,000 commission/$197 in dues). I’d rather have the commission than risk it for small dollars, but there are other groups that see the math very differently.
Donations
You can also make dues optional and set it up as donations to help cover the cost of running the group. We did this for many years and, from time to time, would get someone to contribute a small amount here and there. It was not a big money maker for us: maybe a couple hundred dollars a year with absolutely no promotion or even emphasizing it.
Sell Group
Eventually, you’ll retire and/or sell your business. Having an established, profitable real estate investor group will significantly improve the value of your business when sold. I could see it being the majority of the sale price of my business, since my client list is essentially the group membership save a very small percentage of folks outside the investor group.
Conclusion
In conclusion, I hope you can see how you can have fewer clients and make more money by working with real estate investors and specifically by starting and running a real estate investor group. By running a club you’re adding massive value to a small, niche group of extremely valuable multi-purchase buyers and sellers of real estate. By focusing your energy on a smaller group of hyper-buyers, you can work less, work smarter, attract the best clients, make more money, and still enjoy your life. Plus, the less quantifiable benefits of having amazing relationships with financially independent and soon-to-be financially independent clients is priceless.
If either of my sons ever decided to get into the real estate brokerage business, I’d strongly encourage them to start and run their own real estate investor group. I’d provide them with the two books left in this trilogy on how to start and then how to run a profitable real estate investor group. I’d also provide them access to the power point slides for my classes so they could just plug in their contact information, tweak the presentation and be off and running. I’d even allow them to write a new introduction to the books I give to real estate investors and use those as client acquisition tools just like I do in my brokerage business. It would be largely a turn-key system to a very comfortable, highly profitable real estate brokerage business.
I hope you’ve enjoyed our journey together so far and I look forward to hearing about your success and challenges should you decide to continue on this journey with me in the future.
