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

You might compare a bird dog in real estate to a headhunter, or someone who finds people to fill the right positions at companies. You might even compare bird-dogging to its namesake, the hunting dog that flushes out birds so the hunter can catch them.

To get a better understanding of bird-dogging real estate, let’s look at its advantages and disadvantages and how to bird-dog your first real estate property.

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 on behalf of real estate investors. A bird dog is paid in return when their lead results in a successful purchase.

Many people interested in bird-dogging are new to real estate investing and do not own an investment property of their own.

How does bird-dogging a house work?

A bird dog, or a property scout, works online, in a car or on foot to look for investment properties for real estate investors. They may search for homes for experienced real estate investors to flip or for people seeking housing units, for example. 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 an investor decides to buy the property and the sale goes through, the bird dog gets a commission.

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.

The wholesaler becomes the property owner with the right to transfer the contract, but the seller retains the home’s title. When the wholesaler reassigns the contract, the end buyer completes the real estate transaction directly with the seller.

On the other hand, a bird dog doesn't keep the property for themselves – they pass on their finds to an investor, collecting a finder's fee for their efforts in the end.

The advantages and disadvantages of becoming a bird dog

Let's go over the advantages and disadvantages of becoming a bird dog so you can decide whether this real estate practice makes sense for you.

Advantages

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

• It’s low-risk and low-commitment. Bird-dogging is low risk because it’s a type of real estate investment that doesn’t require the bird dog to purchase property. In addition, it presents a low commitment because once they pass a property off to their investors, they don't have any more responsibility to that particular property.
• You can work part time or full time. Bird dogs can enjoy a flexible schedule, either putting in only a few hours a week or committing to it full-time.
• You’ll gain exposure to the real estate industry. Even though you don't actually purchase property yourself, a bird dog can learn a lot about real estate, particularly when learning how to locate properties that have potential. Newcomers to real estate can find that becoming a bird dog is a great way to learn about real estate on the job.
• You can make a profit. It's possible to earn a good income as a bird dog, particularly because bird dogs don't invest any of their own cash.

Disadvantages

Now, onto some disadvantages of becoming a bird dog.

• 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 because it's not always guaranteed income.
• It still requires some level of real estate acumen. In some cases, a bird dog needs to be in the right place at the right time to find the best real estate deals. However, bird dogs also need to know market trends and must educate themselves about the real estate industry to be successful.
• It can be risky. It's possible to get embroiled in lawsuits as a bird dog, especially if real estate investors promise you commissions and they don't pay up. 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

So, how do you approach becoming a bird dog for your first property? Here's how to go about it, step by step.

1. Build up your network

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, which could also harm your reputation in the real estate industry in your area.

3. Determine your profitability

When you're considering becoming a bird dog, think about how much money you might make per lead. A good starting point is talking to real estate investors in your area. Ask them how much they'd be willing to pay you per lead.

You'll want to charge a finder’s fee or referral fee that nets a profit and takes your expenses into account. You may want to talk to other bird dogs in your area to see how much they charge and how profitable they are – though this may depend on their years of experience.

4. Find your leads

You can source potential leads in many different ways, including the multiple listing service (MLS), the internet, signs around town, foreclosure auctions and trustee sales, real estate events and asking around in the community. Think like motivated sellers. 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 prior to beginning your search can help you identify the right type of properties to go after. You'll only earn money once an investor decides to buy the property. You can then charge them a commission or finder's fee.

6. Repeat the steps

Next, constantly expand your network so you know what investors are looking for. Even more than that, you'll build rapport with investors by consistently finding “diamonds in the rough” and convincing investors of their potential.

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 it worth it to work as a bird dog in real estate?

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

How much can I make from bird-dogging houses?

The amount you can make from bird-dogging will vary depending on the type of properties you find, whether investors are buying the properties and the time you’re dedicating to bird-dogging.

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 who 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.

The bottom line: Bird-dogging requires time and effort

While the low-risk, low-commitment and flexible job description for bird dogging might attract you, you still need significant knowledge of the real estate industry. You must realize that you may not bring home consistent money, especially at first.

In addition, you expose yourself to risk because real estate investors may promise you commissions and not follow through. You'll have to formulate a tax strategy because you’ll have to pay taxes on the money you make. You also want to spend some time researching your area's legal restrictions.

You’ll need to find your leads, sell to an investor and repeat these steps to be profitable.

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