Are you interested in dipping your toes in the world of real estate investing, but you don’t have enough saved for a down payment on a property? Perhaps you would like to make money from real estate, but you don’t want to be a landlord. If so, real estate bird dogging is a strategy you can use to profit from deals without owning homes.
There are many advantages to bird dogging in the real estate market, and one of the best is that you don’t need any money to do it. If you are open to networking with investors and researching potential deals, you may be able to earn money by providing a valuable service to other real estate professionals.
What Is a Bird Dog in Real Estate?
A bird dog is someone who looks for distressed properties or undervalued properties that might make good investments. When a great opportunity is found, it is then presented to real estate investors for a finder’s fee. Depending on the investor and your negotiating abilities, you may also be able to earn a percentage of the profit if an investor flips the property.
Finding real estate opportunities to invest in often requires a lot of time and effort. Because of this, many real estate investors use bird dogs to free their time up for other things.
Bird Dogging vs. Wholesaling
Bird dogging and wholesaling are similar in that they both involve finding distressed properties and undervalued properties for investors. There are two important differences, however, that you should be aware of. Those differences involve who puts the home under contract and how you get paid.
If you are bird dogging, you do not put a property you find under contract. You merely present the opportunity to investors and let them decide whether to pursue it. With wholesaling, however, you put a property under contract and then sell the contract to an investor.
As a bird dog, if an investor likes the opportunity you present, you will be paid a referral fee for your services. Real estate wholesalers, on the other hand, earn money by adding 5% to 10% to contracts when selling them.
What Does a Real Estate Bird Dog Do?
A bird dog’s job may be different from day to day. A productive bird dog may work on growing his network one day, looking for motivated sellers the next, and presenting deals to investors another day.
Here are some common tasks that bird dogs do in their daily work.
Network with real estate investors
A successful bird dog must have a large network of real estate investors who are looking for deals. They are a bird dog’s bread and butter.
To maintain good relations, a bird dog must spend time each month nurturing and growing their network of investors. This may involve attending real estate networking events, meeting investors for lunch, and doing other things to build a network.
In addition to networking with investors, bird dogs should also network with others in the real estate industry, such as agents, brokers, attorneys, appraisers, and home inspectors. They may remember that you bird dog when leads come up and refer them to you.
Research upcoming foreclosure auctions
Foreclosure auctions can be great opportunities for investors to find deals on properties to flip or rent. Finding auctions, however, can sometimes be tricky because it requires keeping up with various sources.
Foreclosure auction notifications can be found in:
- Public records
- Bank websites
- Local newspapers
- Government agencies
Productive bird dogs routinely search these sources for upcoming auctions to look for potential investment properties.
Research the MLS
Although real estate agents typically list homes at the current market price, deals can sometimes be found by searching through the multiple listing service (MLS). A potential investment property could be found on the MLS, for example, that could be an ideal fix and flip if it only needs minor cosmetic improvements.
Research bank-owned properties
When homeowners default on their mortgages, lenders take possession of their homes and sell them to get the money back that they loaned out. Bird dogs often research bank-owned properties to see if they can find good deals. Lenders may sometimes be willing to sell foreclosed properties at a discount to remove them from their books.
Conduct public record searches
Bird dogs regularly search through public records to find off-market opportunities, like preforeclosures and short sales. The research can sometimes be tedious and slow, which is why many real estate investors prefer to let bird dogs do the work for them.
Conduct direct-mail campaigns
A direct-marketing campaign is a tried-and-true method that some bird dogs use to find real estate investment deals. A direct-mail campaign involves sending a letter to the people in a community advertising that you are interested in buying homes. If enough letters are sent out, a certain percentage are likely to respond with leads.
Place bandit signs
Bandit signs advertise that you buy houses. They are a great way to have leads come to you. Before placing bandit signs, however, it’s important to always ask permission from landowners and to ensure that you comply with local laws.
Drive for dollars
Another tried-and-true method that many bird dogs use to find real estate deals is to drive around in different communities looking for distressed properties. This is called driving for dollars. After finding a property, a bird dog can track down the owner to see if he is a motivated seller.
Analyze the profitability of properties
After finding distressed properties, successful bird dogs must carefully analyze them to see if they will be good investments. If the property is a rental, the monthly income and expenses will be considered to see if it is profitable. If it’s a distressed property that would make a good fix-and-flip investment, the cost of rehabbing it must be evaluated to determine whether the deal will be profitable.
Present deals to real estate investors
After locating a deal, a bird dog will then present it to real estate investors to see if any of them are interested in pursuing it. The deal must be presented professionally and in an easy-to-read way, with necessary information clearly listed so investors can evaluate it.
How Much Does a Real Estate Bird Dog Make?
Real estate bird dogs earn different fees, depending on their negotiating skills and the investors they work with. A bird dog contract usually earns a flat fee of $500 to $1,000.
Bird dogs don’t earn money unless they know real estate investors who are looking for deals. Because of this, they will need a strong network of motivated buyers to ensure deals go through.
The income you will earn from bird dogging may not always be consistent, however. One month, you may close one deal, and the next, you may close two or more. You may also have some months when you don’t close any deals.
Bird dogging isn’t a real estate business that provides steady, predictable monthly earnings. Because of this, many people bird dog as side hustles to supplement their incomes. Bird dogging is something you can do in your spare time after work and on the weekends.
How to Become a Real Estate Bird Dog
Becoming a real estate bird dog isn’t difficult, and it’s a great way to start a new career as a real estate investor. Very little money is required to bird dog, and you don’t need a special certification to do it.
A bird dog works independently and is not a real estate agent. No real estate license is required to do this type of work.
Here are the general steps to follow to start bird dogging so you can have your own real estate business.
Grow your network
Before you start looking for deals, first you’ll need a network of investors. When you find a deal, you may need to move quickly on it before other investors find it.
Also, be sure to get to know real estate agents, attorneys, home inspectors, and other professionals. If they know you bird dog, they may occasionally send you leads.
Find out if you need a business license
Depending on where you live, a business license may be required to bird dog. Business licenses are usually handled locally and don’t cost much. If a business license is needed, it can be obtained by applying with the required fee.
Research local demand
Before you start looking for properties, find out if investors in your area are interested in your bird dog services. It’s also a good idea to find out how much they are willing to pay to make sure the work will be worth your time.
Look for properties
You can now start searching for distressed properties and motivated sellers. Some bird dogs prefer to focus on off-market properties because fewer people may know about them. These properties can be more profitable than searching the MLS and other common sources.
Conduct a profitability analysis
When you find a property that you think real estate investors might be interested in, it’s important to conduct a profitability analysis to determine how much money can be made from the deal. In addition to the acquisition cost, you will also need to consider closing costs, renovation costs, taxes, permits, legal fees, and other expenses.
You will also need to consider the current market value of comparable homes (comps) in the community. This will help investors decide how much money they can make after renovating it.
Sell the lead to an investor
After you have identified a profitable investment, you will need to sell it to an investor to earn a bird dog referral fee. The investment information will need to be presented in a way that is professional and easy to read.
When you are first starting out, you can hire a real estate attorney to write a contract that you can use when closing deals. The contract can be amended for each new deal you complete.
Look for new deals
After you have successfully concluded your first bird dog real estate deal, you can repeat the steps to do more deals. As you gain experience, you will become more efficient at researching properties. Also, don’t forget to work on growing your network so you will always have a long list of contacts to present offers to.
Bird Dog Real Estate Training
Although there are some online programs available, you don’t need any formal training to start bird dogging real estate. You can get started as soon as you have a sufficient network of investors who are looking for deals.
If you aren’t sure if this is a real estate investing strategy you want to pursue, you can practice looking for distressed properties before approaching investors. You can explore different research methods and conduct profitability analyses to see how long it takes you to find great deals.
Is Real Estate Bird Dogging Legal?
Generally speaking, bird dogging is perfectly legal. It’s important to research local and state laws, however, to make sure you know what you can and can’t do. Although you don’t need a real estate license to bird dog, for example, you can’t do anything that an agent or broker would normally do.
The Bottom Line
There are several great reasons to consider bird dogging. Unlike most real estate investing strategies, bird dogging doesn’t require any capital to get started, and you don’t have to worry about securing financing. If a deal falls through, your only loss will be your time, which makes it a low-risk way to earn money with real estate.
Bird dogging is also highly flexible. You can continue working a full-time job while looking for bird dog finds in your spare time. It can be a great way to gain valuable real estate investing experience and network with others in the industry.
Finally, bird dogging is also a great way to earn money for your first real estate investment. It could be an important first step in getting started with real estate investing and growing your portfolio.
The ultimate guide to get started in investing!
Many people say they want to get into real estate investing, but with so much information out there, how do you know where to start? Thanks to Brandon Turner and Joshua Dorkin, you can get started now with just one book.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
Source link
