What's a Bird Dog?
I'm not talking about a Labrador retriever or an English springer spaniel. What I'm talking about is your real estate variety of bird dog. Much like a traditional bird dog, a real estate bird dog will hunt out and retrieve a real estate Investment deal for the investor. A good bird dog will have a nose for and the ability to find great deals. A good bird dog will do the market research for the investor, contact the owner and provide the investor, with the information for a fee. Your typical bird dog will make anywhere from $250-$1000 per lead or a percentage depending upon the investor's agreement with the bird dog and that particular deal.
The true professional name for a bird dog is property locator, which I'll use for the rest of this blog. It's considered to be the foundation strategy for the wanna be real estate investor. It's a great way to get the newbie investor's foot in the door of the real estate world. Locating properties for investors is an education unto itself! A good property locator is out beating the pavement and driving neighborhoods. They visit their local tax assessor's office and/or website, they talk to mortgage brokers and probate attorneys. They go to garage sales, moving sales and scour the classifieds for ads such as "everything must go" looking for clues of the motivated seller. They are constantly working to find the best deal possible. They will put ads in papers, mail post cards, post bandit signs, work door-to-door, drive many miles and talk to hundreds of people. It's a networking business and it's a lot of work!
A similar strategy is "wholesale assignment". The lines between a property locator and an "assigner" are blurry and often confusing. The huge difference is, the property locator does not put the property under contract and the assigner does. The wholesale assigner takes the deal to the next level and will assign the contract over to the investor for an assignment fee. It's considered the next step up from the property locator, and there is definitely more profit potential but more risk. Your typical assignment fee can be from $2000-$10,000 on average.
The bullet points below illustrate the differences between the Property Locator and the Assignment of Contract strategy.
Bird Dog / Property Locator
A property locator simply finds a deal and passes the address off to an investor, they might see a vacant property or know of a distressed homeowner. They are the investor's eyes and ears out in the market place. Anyone can be a property locator and there is zero risk involved because a property locator is not signing a contract and putting down earnest money. The steps are simple:
- Find a deal
- Tell the investor about it
- The investor has to profit from the deal
- You get paid
- $250-1000 is the average range
Assignment of Contract:
A wholesale assigner does not purchase the property; they simply get it under contract to control the property. Their job is to run the numbers to evaluate the deal and to assign that contract to an investor that has the cash to do the rehab work. They get paid an assignment fee. A wholesale assigner will often hire a property locator to assist them in finding deals.
- Find a deal
- Negotiate the price
- Get it under contract
- Run the numbers and evaluate the deal
- Present the deal to the investors
- Make an agreement with the cash buyer / investor stipulating assignment fee
- Get paid; the average assignment fee is $2,000-$10,000
- Assign the contract to the cash buyer / investor
A career as a property locator isn't for everyone and it's not a necessary step in becoming a real estate investor, however it is important to know what a property locator is and does as they will be an invaluable member of your power team.