Understanding bird dogs in real estate: What they are and how to become one

Real estate, like many other industries, is full of unique terms and turns of phrase. That can be discouraging, especially if you feel like you’re missing out on key information during conversations.

In real estate, bird dogs are the people who work for real estate investors, helping them find opportunities to invest in. If you’re looking to learn more about the real estate industry or are looking for a unique and flexible career opportunity, bird-dogging could be of interest to you.

What is a bird dog in real estate?

In real estate, a bird dog is an individual who searches for underpriced and often distressed properties. Bird dogs typically do on behalf of a real estate investor who wants to buy into the market but does not have the time to search for promising properties.

The term comes from hunting dogs who are trained to help hunters find or retrieve the birds they hunt.

In general, bird dogs are paid on commission, receiving compensation when the investor they work for makes a successful purchase.

Because you do not need to have money to invest yourself, bird-dogging can be a good option for people who are new to real estate and want to learn how to invest in real estate. Researching different properties can also help you understand different types of real estate investments.

How does bird-dogging a house work?

Every bird dog has a different process, but the goal for almost all bird dogs is to find underpriced or distressed homes that investors can turn a profit on. Common ways to find these properties are through online searches, working with local real estate agents, or simply wandering through neighborhoods looking at homes.

Bird dogs generally search for distressed properties, foreclosures, and other “deals.” Investors and bird dogs alike often seek these properties because of the opportunity to buy a home at a discount.

If a bird dog finds a promising property, they tip off the real estate investor they’re working with, who can then decide whether to try to invest.

How much do bird dogs make?

According to ZipRecruiter.com, bird dogs make around $17 per hour nationally. This translates into a salary just above $35,000 annually, assuming 40-hour work weeks.

It isn’t clear if the bird dogs who were surveyed by ZipRecruiter were working only every so often as a side hustle or putting in a 40-hour work week. Either way, this may indicate you will need to be patient while building up your contacts and developing your business. It also may make sense for those who are looking for a flexible side hustle and are good with having their income fluctuate depending on the number of deals that close.

Is there a difference between bird dogs and wholesalers?

Yes, there is a difference between bird dogs in real estate and wholesale investing.

A wholesaler acts as the intermediary between a home’s seller and an end buyer. The wholesaler contracts with the seller for the exclusive right to buy the property for a set amount. They then attempt to reassign the contract to an end buyer for a higher price, which is how they make their profit.

Sellers benefit because selling to a wholesaler is usually faster and easier than listing a property on the open market and waiting for buyers. Buyers benefit because wholesalers are usually experienced in real estate and make the purchase process go smoothly.

Bird dogs, by comparison, never take ownership of the homes they find. Instead, they pass the information on investable properties to another person who then decides whether to invest or buy the property. Bird dogs make money through a finder’s fee rather than by buying property and then selling it at a markup.

The advantages and disadvantages of becoming a bird-dog

If you’re thinking about getting involved in real estate investing, bird-dogging can be a good entry point. This is especially true if you don’t have much capital to start investing because bird-dogging only requires time and a bit of expertise in the market. However, it’s not a perfect job so it’s important to consider the drawbacks before you can commit.

Advantages

Here are some advantages of making money by bird-dogging:

• Flexible schedules. Bird dogs are independent contractors and typically don’t work for a company. You can set your own hours and work as much or as little as you’d like.
• No capital is required. It’s no secret that real estate is expensive. The median single-family home now costs more than $400,000, so it can be hard for individuals to get on the property ladder, let alone start investing in real estate. Bird-dogging gives you a chance to get involved in real estate even if you don’t have your own funds to invest.
• Earn a profit. With effort, skill, and some luck, it's possible to earn an income as a bird dog. However, the income can be incredibly variable because you’ll only get paid when an investor successfully buys a property you recommend.

Disadvantages

Now, onto some disadvantages of working as a bird dog:

• Inconsistent pay. You won’t bring home a consistent salary. Bird dogs can't always count on the right properties being available or investors liking the properties they choose. In general, commission-based work comes with financial risks related to not having a consistent paycheck.
• Some real estate experience is required. In most cases, a bird dog needs to be in the right place at the right time to find the best real estate deals to send to the investors they work with. That means being familiar with market trends and understanding enough about the real estate industry to identify good investment opportunities.
• Legal risks. It's possible to get embroiled in lawsuits as a bird dog, especially if real estate investors promise you commissions and don't pay. You will always need to have a written contract in place with the investors who use your services. If they don’t pay up, it may be difficult and expensive to compel them to pay you. In addition, you'll have to formulate a tax strategy because you can't avoid paying taxes on the money you make.

How to bird-dog your first real estate property

If you’ve decided that bird-dogging is the right path for you to take in real estate investing, you’re probably excited to get started. While there’s nothing stopping you from pounding the pavement and looking for good investment properties, it’s important to come up with a strong plan so you know what to do when you find an opportunity.

1. Build up your network

In real estate, just as in other industries, relationships are key. This is especially true for bird dogs, who need to know investors that they can tip off about investment properties.

Get to know everyone that you can locally. Build up a large network so as many people know about your efforts as possible. Your network may include real estate agents or REALTORS^®, investors, and other professionals.

2. Research legal restrictions

It's important to investigate the legal ramifications of bird-dogging. In most cases, bird-dogging is legal if the person identifying the deals doesn't facilitate the actual transaction. However, laws vary across the country.

Bird dogs can’t act as agents or brokers because doing these activities requires a license. You may face legal consequences if you tiptoe over the boundaries. This could also harm your reputation in the real estate industry in your area. You also may want to have an attorney on retainer in case you need to take legal action to have an investor pay you your commission.

3. Determine how you will charge

Bird dogs often charge either for each lead they provide, a percentage on the sale of the property, or a hybrid approach that includes fees for both. You’ll also want to have a contract in place that specifically states how much you will charge and when the funds are due.

Through networking, you may be able to discover how much bird dogs in your area are charging and price yourself accordingly.

4. Find your leads

You can source potential leads in many ways, including:

• The multiple listing service, or MLS
• The internet
• Signs around town
• Foreclosure auctions and trustee sales
• Real estate events
• Asking around in the community
• Walking around and driving around in your community

Try to think like a motivated seller. If you were motivated to sell, who would you approach? Where would you go in your community?

5. Sell to an investor

Once you find leads, it's important to analyze whether the deal has a potential profit opportunity and whether it will meet investor needs. Hopefully, the networking you did with investors before the start of your search can help you identify the right type of properties to go after.

Remember, you'll only earn money once an investor decides to buy the property so it’s in both of your interests to only provide good leads that the investor will be interested in.

6. Repeat the steps

Once you’ve closed your first bird-dog deal, you’ll probably feel a rush of success. Now, it’s time to repeat that process.

Keep expanding your network and try to meet investors with different goals and property focuses. One investor might not like that worn-down duplex, but if you know another person who would be very interested, a property that might not have been of any value to you before suddenly becomes a potential lead.

As you expand your network, you’ll get more opportunities to send leads to investors and increase your income. Successful bird dogs often spend years in the real estate business and consistently work with a small network of private investors.

FAQs about bird-dogging in real estate

Now let’s answer some of the most frequently asked questions regarding bird-dogging in real estate.

Is becoming a real estate bird-dog right for me?

Deciding whether it’s worth it or not to work as a bird-dog depends on many factors. Do you have time to build a network, learn about the real estate business, and find available properties? Becoming a bird dog might be a good career move for you.

What are the best areas for bird-dogging houses?

Neighborhoods that are in transition and may have a lot of older homes offer opportunities for bird dogs to identify properties that would be of interest to investors.

How do I become a bird dog?

There are a couple of steps you can take to start working as a bird dog in real estate.

An initial step is to network and become familiar with other real estate professionals in the industry. They can give you a better idea of how much you could make as a bird dog. Another important step is to research the legal restrictions in your local area for people who bird-dog.

Can bird-dogging be illegal?

The legality of bird-dogging varies from state to state. Real estate professionals, such as brokers, need to get professional licenses to legally help with transactions and get paid. Without a real estate license, bird-doggers operate in a bit of a gray area, so it’s key to check your state’s laws to see what you are allowed to do and things you should avoid.

While not related to real estate law, it’s also important to make sure you manage your finances properly and stay on the good side of the IRS. That means paying income and self-employment taxes on any income you earn from bird-dogging.

You may also consider forming a limited liability company for your work as a bird dog. This can help limit your losses if you’re sued by a client for giving a bad referral, a potential conflict of interest, or other reason. Separating your personal and business finances can also be helpful for dealing with taxes.

The bottom line: Bird-dogging requires time and effort

The low-risk, low-commitment, and flexible job description for bird-dogging might be attractive, but it’s still important to be realistic. Successful bird dogs have spent years in the industry learning about real estate and building relationships. If you’re just getting started, you might not make much money, or possibly none. To succeed, you’ll need to be able to find leads, sell them to an investor and repeat.

If you’re ready to explore your options for real estate investments, start your mortgage application today.