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Property Clubs, The Right Way and The Wrong Way To Run Them

Over the past few years I have watched with interest as many budding entrepreneurs set up and run different styles of Property Clubs on behalf of their members.

Providing you have the correct experience, and in the case of operating within the United Kingdom, the correct approvals from the Financial Services Authority, you can set up and run a Property Club which can be of great benefit to the members.

I have though two main worries with these clubs/syndicates.

Firstly the amount that people are charged to get membership, and secondly the amount the directors pay themselves for running these enterprises.

It is quite the norm for Property Clubs that the first 10-15% of any subscription is taken and used for “set-up” charges, and it is also normal for the directors to pay themselves maybe £150,000 per annum whatever the performance of the fund, and a bonus on top for when things go right.

My opinion is that the set up charges should be met prior to anyone joining, because if they are waiting for your money to set up properly, how committed are they to the project if they have not put enough up front themselves to launch it?

Secondly Property Club directors should be working for a lot less than £150,000 plus. The idea you sell shareholders is the dream that they will enjoy the growth benefits of international property prices, but wait to cash in for around 10 years. It would be far more beneficial for the fund to have the directors working for £40/50,000 per annum (a figure most people would still find appealing) and then given shares based on the success of the syndicate. Most syndicate directors take the big salary and also give themselves a big bonus for doing well. It should be one or the other, or a combination of both but on a lower figure.

No one denies the need for a salary as it encourages us to turn up each day, but the Property Club directors like to have it both ways, and t must be true that during their exploration for their syndicate they find good deals for themselves of which to take advantage. Heads they win, tails they win.

Property Clubs should be conducted in a much more ethical manner, with the emphasis being on customer satisfaction, as it is in most other walks of life.

Mike Linder

Article Source: http://www.articlemap.com

Mike Linder is an international property owner and a director of www.makemeanestegg.com an investment company which offers people with a small amount of money to invest the chance to get on the international property ladder.

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