What Is A Bird Dog?
A bird dog in real estate is a person who searches for undervalued or off-market properties and offers them to real estate investors for a flat fee or percentage of the profit. They don’t work as a real estate agent, instead starting by networking with other bird dogs or by working with them. A bird dog is named after a hunting procedure where trained dogs find fallen birds for hunters. Because “bird dogs” find investment properties for other real estate professionals, the phrase has now become commonplace in the business.
Finding Properties
Finding undervalued properties is a consistent part of the process. Bird dogs will typically look for foreclosures, bank-owned properties, and distressed homes using the MLS, direct mail campaigns, bandit signs, public records searches, or driving around. A bird dog will spend most of his or her time gathering information about a property before presenting the opportunity to an interested investor. A bird dog will focus most of his or her energy on identifying available properties in their area. Their job is to gather as much information as possible about a home before presenting it to an investor.
After finding suitable leads, birds dogs will briefly examine the deal’s profitability before contacting an investor. When an investor chooses to buy the property, bird dogs can earn either a fee or a percentage of the profits for their services. To ensure they can provide any suitable properties to investors and earn money for their research, bird dogs must constantly expand their investor network. The success of a bird dog ultimately depends on their ability to find properties and convince investors of their potential.
What Is A Bird Dog Referral Fee?
There are two main ways bird dogs are paid, either by an hourly rate or a referral fee. In the referral fee method, an investor will pay a bird dog whenever they close a deal that came at that bird dog’s referral. The fee is usually a flat fee, or a percentage of the deal amount. Because the investor is incentivised to provide a high-quality list of leads through referral fees, most investors gravitate towards this type of payment. The investor will also profit if the investor closes a great deal since their profit is dependent on it.
How Much Does A Bird Dog Make?
Bird dogs commonly charge between $100 and $500 per closed deal flat rate referrals, or 2 to 10 percent of the profit percentage-based referrals. Bird dogs charge what they think is a reasonable amount based on their level of experience, the number of hours they spend sourcing leads, and the quality of those leads.
Is Bird Dogging Legal?
Whether or not bird dogging is legal varies by region, but it’s acceptable for the person identifying the deal to stay away from the proceedings. It is not necessary for a bird dog to act as an agent or broker at any time, so always check the law in your region before doing something. If you cross the line as a bird dog, you may run into legal problems. You may also harm your reputation as a real estate investor by crossing the line as a bird dog.
Advantages of Bird Dogging
Aside from financial gain, this profession may also provide you with several other benefits:
- Making Connections: Building up a network of motivated sellers, real estate investors, and more in your market area is necessary for bird dogging. Finding competent connections may be possible later on in your profession if you take time to develop relationships with these clients.
- Hands On Real Estate Experience: Property experience is vital to any profession. Working with more properties may help you recognise and acquire superb deals. This is an excellent and beginner-friendly method to learn the ropes of real estate.
- Low Start-up Costs: You don’t need to invest any money to begin researching properties and contacting investors. You can start without a lot of money because of this approach. While the cost of your time must be considered, it may be a good way to break into the industry without a lot of capital.
Downsides of Bird Dogging
Before you dive into this role in the real estate industry, consider the following cons:
- Compensation: Being a bird dog doesn’t pay you a salary, so you will only earn money when you successfully connect investors with properties. If you are occupied with other responsibilities or do not refer properties frequently, your income will decrease accordingly.
- No Guaranteed Income: As a bird dog, you are not on anyone’s payroll, so you will only earn money when you successfully connect investors with properties.
- Commitment: To be successful, you must spend time researching. It may take several months to refine your lead generation techniques and build rapport with investors in order to make your first referral. You may spend weeks or months to make your first referral. Research is the most challenging aspect of your job as a bird dog. You will have to learn to separate between viable leads and properties that are not worth your time.
Bird Dogging Versus Wholesaling
The difference between wholesaling and bird dogging is that wholesaling involves getting properties under contract and handing those contracts over to interested real estate investors, whereas bird dogging does not. Wholesalers make money by getting properties under contract and then handing those contracts over to interested real estate investors. When properties are purchased, wholesalers are paid a percentage of their value. Both bird dogging and wholesaling involve finding undervalued properties and presenting those to qualified real estate investors.
However, the key distinction is the degree of involvement they have in the deal. Wholesalers contract for property (although they are not official owners). Bird dogs simply hand over facts to investors, without ever negotiating the property with potential buyers. Both of these opportunities are excellent steppingstones into the real estate business, as they can help beginners invest in real estate sooner. There’s more chance of success with wholesaling, and that is why it may be more suitable for people without any experience.
How To Find Real Estate Deals By Bird Dogging
It’s possible to generate a lot of cash flow from learning how to bird dog in real estate if you are willing to put in the work. The first thing you must do is look up the relevant laws in your area. Utilize everything you know to avoid problems when you begin referring properties to investors so you don’t run into legal issues.
Make sure you have a sample contract ready when you start looking for properties. The only way to ensure you are compensated for your time and work is to put it in writing, so make sure you have a contract prepared when you begin looking for places to live. Once you’ve identified properties, start looking for potential leads. You may locate undervalued properties in your area using several different approaches. Start your search by establishing connections with potential investors in your area. This will make sure you identify who to bring each deal to.
You must be patient when setting up your network and getting acquainted with your market area. Don’t be hard on yourself if your setup process takes a while to finish; that is to be expected when it comes to bird dogging. As you refer each property and investor, you will learn more. The most critical things to remember throughout this process are to stay within local laws and to protect yourself through contracts.
Protecting Yourself
Creating a real estate contract is a good idea if you want to protect yourself from being paid afterwards in a timely manner if a deal closes. A contract is a legal document and should therefore be scrutinised by a lawyer and ensured to withstand court scrutiny. It should also be reviewed prior to signing by an attorney.
Consider including the following information into your agreement:
- Identify the full name of each party involved and include the percentage or flat referral fee that the investor will pay you once the deal closes.
- Specify the point in time at which you should be compensated during closing.
- Make sure to include any language regarding the timing at which you will be compensated, in addition to the investor’s working relationship with you and any other terms, conditions and contingencies that you may have negotiated with the investor.
A Quick Recap
Finding capital to invest in real estate can be difficult for beginners. Fortunately, there are several strategies—such as bird dogging—that can both build up your finances and build up your network at the same time. Before engaging in any activity, make sure to check the laws in your local area and determine whether this opportunity is right for you. Bird dogging might take years to succeed, but when executed properly, it may enable you to eventually buy investment properties.