One of the biggest reasons new investors shy away from getting started in real estate is the misconception that it takes a lot of money to get up and running.
You’ll see in this guide, though, that investing and having a war chest full of startup capital isn’t the only way to get started in real estate.
There’s another strategy you can use to make money in real estate that doesn’t require you to have upfront capital — a strategy called bird dogging.
What’s A Real Estate Bird Dog?
A “bird dog” is a term that’s been borrowed from the hunting world.
When hunters are looking to drive game out of their hiding spots, they use dogs that can “point” out the birds in the grass.
This makes it easy for the hunters to get close to the birds without spooking them off until they’re ready.
In real estate, a bird dog is someone who locates properties that could make a good investment then points them out to investors.
How Bird Dogging Works
As a bird dog in the real estate industry, your job is to get into the market and look for prime investment opportunities — think distressed properties, properties in foreclosure, short sales, and others.
Once you track down a property, you contact an investor and give them a chance to decide whether or not they want to move on the deal.
In exchange, you get paid a finder’s fee for helping the investor locate the deal.
As a bird dog, you can expect to receive anywhere from 2% upwards of 8% of the profits generated by the deal if the investor moves forward on it.
Is Bird Dogging Legal?
Bird dogging is a 100% legal way to make money in real estate without being an investor.
The caveat, though, is making sure you’re not representing yourself as the property owner. You also aren’t able to participate in the transaction between the investor and seller, meaning you’re not an agent or broker.
To help you avoid any potential issues, you’ll want to check with your local laws and ordinances to ensure that you aren’t violating any laws by participating as a bird dog.
Becoming a bird dog is a GREAT way to get your foot in the door in real estate without taking on a ton of risk or needing upfront capital.
There’s quite a few advantages to the strategy, like…
- Low barrier to entry. Since becoming a bird dog doesn’t require any investment on your part, outside of your time, it’s one of the few ways you can make money without having money.
- No credit needed. You don’t need to use your own credit to get started. With most other forms of investing, if you have bad credit you’re facing an uphill battle when it comes time to secure financing on the properties you want to invest in.
- Less risk involved. By only putting your time and energy into locating properties that other investors will purchase, you’re not risking any of your own money if the deal falls through or the investment doesn’t work out.
- Learn the industry. You’ll learn quite a bit about the industry as you start developing a keen sense for which properties would make a great deal and which ones should be avoided.
- Build your own business. Not only are you gaining incredible experience as a bird dog but you will also build a network of investors that can help you in the future.
Bird dogging, for the right person, is one of THE best ways to build your business from the ground up.
With all the advantages bird dogging provides, though, it also comes with a few distinct disadvantages.
- It’s not easy. If you’re new to real estate, being a bird dog can feel incredibly difficult. You’ll put in a lot of time tracking down a good deal and even that doesn’t guarantee your success. You will also need to find investors who are willing to purchase the deals you find, which can be hard to do.
- You’re paid for success. Since you’re only paid when an investor purchases the property, there’s no guarantee that you’ll get paid for the work you’re doing. You could spend time and energy locating a deal only to have your investor pass on it.
- Scammers exist. Unfortunately, there’s always investors who are looking to take advantage of you and cut you out of the deal when you pass a property onto them. This means you’ll need to carefully vet who you work with and only work with reputable investors.
How To Bird Dog Without Risking Your Commissions
There’s no denying that bird dogging requires a good bit of upfront effort on your part.
Finding good investment opportunities takes time and energy so it’s critical that you’re doing everything you can to protect your commissions and ensure you’re getting paid for the time you put in.
There’s a few things you can do to make sure you’re getting paid for your work.
#1 – Research, Research, Research
One of the best ways to protect your potential commissions is by investing in quality research.
When you understand the nuances of a particular area, such as distance to shopping, quality of the schools, activities, community services, etc., you’ll have an easier time spotting good deals.
You’ll also be able to position those deals in front of investors by showing them the true value in the property and why the price reflects the potential upside once the deal is done.
#2 – Specialize
You might also want to consider specializing in one or two specific types of investments.
For instance, you can specialize in finding fix-and-flip deals, short sales, foreclosures, or buy and hold properties. Then, the network of investors you build will be focused around doing those types of deals.
This makes it significantly easier for you to facilitate good deals while also commanding a higher payout on your side when the deals are finalized.
#3 – Build Your Network
With any type of real estate business model, your network is your net worth.
And when it comes to protecting your commissions and making sure you don’t waste your time, building a solid network of investors is a smart move.
Your network should include everyone from appraisers, to brokers, agents, investors, and other real estate professionals. Having a diversified network ensures you can move one deal from person to person until someone sees the potential locked up inside of it.
A good network also makes it easier to find deals and get people wanting to do business with you.
#4 – Find Motivated Sellers
The backbone of your success will revolve around being able to find a consistent flow of motivated sellers.
There’s a whole host of reasons someone would be motivated to sell their property to you for less than what they could sell it for on the open market.
There’s quite a few ways to start locating these motivated sellers, too.
One of the best, though, is direct mail marketing using postcards and messaging that have been proven to convert at a higher rate than other marketing strategies.
Check out our guide on Finding Deals With Direct Mail WITHOUT Wasting Money.
#5 – Inspect Your Seller
Just like you would inspect the property they’re selling, you’ll also want to inspect the seller BEFORE you start presenting the deal to your network of investors.
The first thing you want to verify is that they’re the sole owner of the home. This ensures that you’re not going to be taken advantage of and that your investor will not have to deal with potential legal issues down the road.
You also want to ensure that the property is a good investment by getting an appraisal to verify the true value. This will help you protect the commission you generate and make sure your investor gets a good deal.
The due diligence you perform upfront can save you a ton of time and headache as your investors start moving forward with closing on the property.
#6 – Find A Buyer
The next step is finding investors who are willing to purchase the properties that you find.
Typically, investors will focus on one specific type of deal — like fix-and-flips, or buy-and-holds, for instance. This means you’ll want to build a varied network of buyers who you can pass deals onto as you begin finding them.
You can start by networking with other professionals, by contacting local real estate agents, searching online, or by using any of the strategies on this list.
It’s generally easier to find buyers than it is to find sellers. This is especially true if you’ve specialized in the same type of investments they’ve built their businesses around.
#7 – Protect Yourself
Now, probably one of the most critical steps you need to take as a bird dog is to protect yourself legally.
Protecting yourself as a bird dog means having a contract or written agreement in place that outlines exactly what you’ll be doing, the scope of your work, how much you’ll be paid, and what happens if the deals you forward to investors happen to fall through.
You’ll also want to ensure you’re protected under a legal entity, like an LLC, to separate your personal assets from the business in case something happens.
Protecting yourself legally will ensure that you’re getting paid for the work you do but also protect you from potential complications down the road.
How To Find Deals
There’s quite a few ways you can find off-market properties to bird dog for your network of investors.
Some of the most popular are going out into the community and “driving for dollars”, looking for FSBOs (for sale by owner) or scanning the MLS and looking for properties that are set to expire unsold.
To learn more about each of these strategies, check out the following guides:
- 9 Driving For Dollars Hacks To Get More Deals
- 8 Best Practices For Creating An Effective Direct Mail Marketing Campaign
- Real Estate Cold Calling Guide (And Scripts — With Examples)
- 10 Proven Ways To Find Motivated Sellers In ANY Market
Your business lives and breathes on the number of high-quality deals you can find, so it’s worth investing your time and energy into learning how to consistently generate a steady flow of new potential deals.
Bird Dogging vs Wholesaling
On the face of the strategy, bird dogging looks and feels a lot like wholesaling — but there are a few key differences in the approach.
While you’re wholesaling, you’re directly involved in the contract with the seller. When you’re bird dogging, though, you’re only locating the property and then getting in a contract with your investor.
A wholesaling contract outlines how much time you have available to find a buyer while, as a bird dog, no contract exists between you and the seller.
That does mean, though, that the property could potentially sell before you’re able to find a buyer for it.
With wholesaling, you’re protected because the property is already under contract. With bird dogging, that protection doesn’t exist, so you’ll need to move fast once you locate a prime investing opportunity.
Should You Use Bird Dogging As An Investor?
Bird dogging isn’t a strategy that’s great for everyone.
It requires a good amount of time and energy that many people aren’t willing to put in.
However, for the people who are willing to explore the strategy, it can be one of the best ways to get started in real estate. It’s a low-cost way to learn about investing, find great deals, and build a network to do business with as you become more advanced or have more cash and credit available to invest with.
If you’re looking to get started in real estate but want to dip your toes in before you jump into the deep end, bird dogging could be one of the best strategies for you.