Two major strategies of creative real estate investing are that of “bird-dogging” and that of “wholesaling”. Many newbies starting out in the real estate business have no clue of how to differentiate the two. Heck, there are some novice professionals in the business that still have yet to grasp the concept of the title and duties given to both sectors.
First things first, if you have interest in either field you must first understand the duties of each profession. This is extremely important so that you can appropriately market yourself to colleagues and prospects that you are going to cross paths with on a daily basis. There is a huge difference in both categories and I am going to expose the difference of each method utilized in this simple to understand blog post.
Instead of going out and buying countless of wholesaling books and wholesaling courses let’s first evaluate each method of the business to see where your comfort level lye's. It really comes down to your personality type and how much you want to be hands on and knee deep into the business. I will reveal to you the pros and cons of each sector along with including a description of the duties involved as a bird dog versus a wholesaler, so let’s begin.
A bird-dog is a finder of wholesale (no-brainer) deals. They typically lay low and don’t often get heavily involved with the sellers of the properties. Their main goal is to form alliances (and sometimes limited partnerships) with investors who are ready to purchase at any given time. In the majority of cases these investors are cash buyers who are eagerly waiting for these Killer wholesale deals to be referred to them from one of their many “bird-dogs”.
Some of these investors will absolutely entertain creative options with the property owners, such as subject-to’s, owner financing, and lease option deals. It really just depends on the type of investor you’re working with and their cash flow, as well as their exit strategies. Some investors want to get in and out of the deal so would rather flip properties instead of holding on to them for the long term profit. Other investors would rather acquire houses by a lease option (or other creative method) and do a sandwich lease for a stable monthly cash flow. Though those types of investors only receive a small but substantial payment up front (i.e. $3,000+), and maybe a few hundred per month. It is typically well worth the wait for the big pay day towards the end.
Once you start to develop your pipeline of real estate investors, you need to be able to identify EXACTLY what their needs and wants are in a property. Time is of the essence with the investors in this line of work. The less time they misuse the more time they can be productive on the deals that really count.
Always remember, TIME means MONEY! You want to show them that you value their time. They need to know that you will not be contacting them and wasting their life away to pitch properties you should have better analyzed and noticed would never be of any interest to them. Once you have this concept down you can expect your calls to be answered and / or returned without much lag time. In addition, you can expect more deals you bring their way to close, which in return increases your Profits! And isn’t that what we all want? Of course it is!
You need to evaluate each one of your investors needs and cater your real estate search to that particular investor’s guidelines. The following are a few key details that you should familiarize yourself with when working with investors:
- Type of Real Estate they’re seeking: (i.e. Residential / Commercial / Industrial)
- Style of home: (townhouse / condo / single detached, ranch, etc)
- # of bedrooms (if they specify a minimum)
- #of bathrooms (if they specify a minimum)
- Price Range
- Will rehab / fixer-uppers be considered? If so, how much $ are you willing to get involved – just cosmetic work? What exactly are the guidelines)
- Prefer just pretty homes with little work involved?
- Where do the numbers needed to be (20% below market value, 30%, 50%, where?)
- What areas, counties, states, etc (what areas are off limit? Which ones are preferred?)
The list goes on and on. Your job is to problem solve and gather as much information as possible so that when you come across one of these deals you are 85% sure, or greater, that your investor will be excited to move forward to a closing. Keep in mind there is room for error. As long as you know that there is a possibility for a favorable outcome, your “deal” should always be passed on to your investor for review.
Once a bird dog is confident in the types of properties their investor(s) are seeking they set off on a search that is limited only to that particular criterion. The bird-dog can, but need not contact the owner of the property, unless they are comfortable with calling to get a few more tidbits of information. Some bird dogs even go the extra mile to ask if the seller would possibly consider a price reduction of a certain amount.
Once a property is located or a seller is contacting who may fit the investor’s qualifications, the real estate bird dog (referrer) passes the lead on to their investor. If the investor decides to purchase the property the bird dog receives a referral fee, which is typically paid at close or within 48 hours thereafter. If you prove yourself to be a notable professional whom they can count on continuously to provide these “no-brainer” deals it may even yield some benefits, such as, getting advanced payment prior to closing if need be.
To Sum it All Up
A bird-dog merely builds and nurtures professional relationships with real estate investors seeking specific property to buy time and time again. The bird-dog then sets out to locate these much wanted properties. The bird-dog then communicates their “find” to their chosen investor(s). If the investor purchases the property the bird-dog is paid a referral fee. That’s everything, wrapped up in a nutshell!
If you are more hands on and want to get involved in your deals and working with the sellers of these properties, you may want to consider wholesaling houses as an alternative. When you wholesale homes, you get knee deep into not only locating properties, but contacting the owners. In addition, you are negotiating, structuring and contracting the deal for a higher profit. This profit is better known as an assignment fee. One of the pros of wholesaling deals versus bird-dogging / referring them is that you get paid at the time of the assignment. Yes, this means even before the deal closes! To learn more about wholesaling real estate, read my blog post Wholesaling Real Estate 101 ½