Real estate investing offers numerous avenues to bolster your finances and connect with professionals in the industry. From becoming a real estate agent to flipping houses, each path presents an opportunity to kickstart your real estate investing business. One lesser-known option is bird dogging, a unique approach that requires no upfront capital. In this guide, we will explore how you can successfully find and present your first bird dog contract.
What is a Bird Dog?
A bird dog in real estate is someone who researches off-market or undervalued properties and presents them to investors in exchange for a fee or a percentage of the net profit from the deal. Unlike licensed real estate agents, bird dogs work with other bird dogs or build a network in their market. The term "bird dog" comes from hunting, where trained dogs find fallen birds for hunters. Similarly, in real estate, bird dogs find investment properties for professionals.
How Bird Dogging Works
Bird dogging requires rigorous market research and the ability to consistently find undervalued properties. Bird dogs typically search for foreclosures, bank-owned properties, and distressed homes using multiple strategies such as MLS listings, direct mail campaigns, public records searches, and driving around neighborhoods. Their main task is to gather as much information as possible about the property before presenting it to potential investors.
After identifying suitable leads, bird dogs analyze the potential profitability of the deal before reaching out to investors. They earn money when investors decide to purchase the property, receiving either a fee or a percentage of the profits for their services. To be successful, bird dogs must constantly expand their network of investors and continuously find potential properties that meet investors' criteria.
Bird Dog Referral Fee
Bird dogs are typically paid through a referral fee or an hourly rate. The referral fee is the preferred method for most investors, as it motivates bird dogs to produce a high-quality list of leads. The fee can be a flat amount or a percentage of the deal. The actual amount depends on the bird dog's experience, the number of hours dedicated to finding leads, and the quality of the leads produced.
How Much Does a Bird Dog Make?
Bird dogs charge anywhere from $100 to $500 per closed deal for flat rate referrals. For percentage-based referrals, the range is usually between 2 to 10 percent of the profit. The fee policy depends on the bird dog's level of experience, the hours dedicated to lead generation, and the quality of the leads produced.
Is Bird Dogging Legal?
Bird dogging is legal as long as the person identifying the deals does not get involved in the actual transaction. However, laws can vary depending on the locality, so it is essential to consult the laws in your area. Bird dogs must be careful not to act as agents or brokers without the appropriate license or training. Violating these boundaries can lead to legal consequences and harm your reputation in the industry.
Pros and Cons of Bird Dogging
Pros
There are numerous benefits to becoming a successful bird dog:
- Networking Opportunities: Bird dogging requires building a network of motivated sellers, investors, and other professionals in the market. These connections can prove valuable throughout your career.
- Hands-On Real Estate Experience: Bird dogging provides an excellent way to learn the ropes of real estate by working with different properties and investors.
- Low Start-Up Costs: Unlike other real estate investment paths, bird dogging does not require upfront capital. You can begin researching properties and contacting investors without spending money.
Cons
However, there are some downsides to consider before diving into bird dogging:
- No Guaranteed Income: As a bird dog, your income relies solely on successfully connecting investors with properties. Your earnings may fluctuate depending on your ability to consistently refer properties.
- Time-Consuming: Researching undervalued properties and building relationships with investors takes time. Expect to invest several months into refining your lead generation techniques and expanding your network.
- Research Intensive: Differentiating between good leads and unprofitable properties can be challenging. Be cautious of opportunities that seem too good to be true, as they may consume your time and yield no results.
Bird Dogging Vs. Wholesaling
Bird dogging and wholesaling are similar in that they both involve identifying undervalued homes and presenting them to real estate investors. However, there is a fundamental difference in their level of involvement in the transaction. Wholesalers acquire properties under contract and then assign those contracts to interested investors. On the other hand, bird dogs provide information on potential properties without securing them. Wholesaling can be more open to those without experience, as it involves more responsibilities.
How to Bird Dog in Real Estate
Learning how to bird dog in real estate requires initiative and dedication. Start by researching the relevant laws in your area to ensure you stay within legal boundaries. Finding a mentor can also be invaluable, so explore real estate Facebook groups, LinkedIn pages, and local events to connect with experienced investors who started as bird dogs. Once you have a solid foundation, create a sample contract for your future referrals to protect yourself and guarantee payment.
Next, employ various techniques to find distressed properties in your area. Building relationships with potential investors simultaneously is crucial for knowing who to bring each deal to. Remember, building a network and familiarizing yourself with the market area takes time. Be patient and learn from each property you refer and each investor you work with. Always prioritize compliance with local laws and protect yourself through contracts.
Bird Dog Contract in Real Estate
If you decide to become a bird dog, it is essential to protect yourself by creating a real estate contract. This contract ensures that you are paid properly and promptly whenever a deal closes. It is highly advised to have the contract reviewed by a real estate attorney to ensure its legality and enforceability.
Include the following information in your contract:
- Full and legal names of all parties involved
- Referral fee or percentage agreed upon for each deal closed
- Timing of payment during closing
- Address any exclusive working relationship if applicable
- Any other negotiated terms, conditions, and contingencies
The Best Bird Dog Real Estate Software
Incorporating technology into your bird dog arsenal can significantly enhance your effectiveness. Propstream, for example, is software that aggregates possible and actual properties for targeting. Another useful tool is DealMachine, which combines deal sourcing and direct marketing, making a bird dog's job much easier. It even features a mapping feature for optimal driving routes when searching for potential properties.
Summary
Real estate investing requires capital, which can be challenging for beginners to obtain. However, strategies like bird dogging offer an excellent way to build finances and connections simultaneously. Remember to research the laws in your local area, find a mentor, and create a solid contract to protect yourself. Bird dogging takes time and patience, but when done right, it can provide the funds to invest in your properties down the line.
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