Bird dogging vs. Jumping into wholesale

13 Replies

I am new to investing and was wondering should I start as a bird dog or should I jump right into wholesaling? 

I have read a few books on real estate investing and wholesaling however I do not have a mentor which I feel may hinder me when starting out. Any suggestions? 

Check with your state real estate commission.  While wholesaling is usually legal in most states if done properly, birddogging (getting referral fees for finding property for someone else) is illegal in most.

If you are spending the time and the money to market for deals, why not wholesale them instead of birddog?  $500 is a standard Birddog fee... We average $7,500 on a wholesale, so you do the math!

Good luck!

@Paul Ewing   beat me to it. As I would interpret the term, "Bird dogging" is the illegal practice of brokerage services without a license. Now from a practical point of view are you likely to get in trouble for doing this, no probably not. There is no Bird Dog Police out looking for you. Just understand that is is likely illegal and that is a risk you are taking.

Other than that problem bird dogging is a fine way to start. But the difference is not that big. If you can find and negotiate a good enough deal, the ability to put it under contract is not that much harder.

If you do bird dog the person you are referring the deal may be able to write up the contract is a way that would allow you to be part of the deal and legally accept the fee.

Thank you @Paul Ewing  @Ned Carey  @John Horner  for the insight. I'm young and new and after a few readings figured that it would be important to start as a bird dog since I have no money but all the while my goal was initially to jump into wholesale.

Another question are there any hidden outstanding risks to wholesaling? 

There are hidden risks to all areas of real estate. 

I am going to make a bold statement that many will disagree with, but they are WRONG LOL

Real Estate is about the riskiest investment you can make.

Few will tell you that but it is true. Donald Trump's attorney George Ross said "People forget as many people lose money in real estate as make it." I don't agree with that exactly and I bet he was using hyperbole to make a point. But many people do lose money in real estate. The great thing about real estate is your risk is proportional to your knowledge. Real estate can be very LOW RISK for those that take the time to learn it well.

OK of my soap box. You asked what are the risks of wholesaling. 

  • Losing a deposit because you can't find a buyer is probably the main risk. 
  • A secondary risk is screwing up your reputation because you have deals that keep blowing up an not working out.
  • Potentially legal trouble because some bureaucrat decides wholesaling is illegal (Tiny risk except in OH where the bureaucrats are starting to think this way) 
  • Liability issues because you did not disclose something you should have.

I am sure there are others but wholesaling is one of the lower risk areas of this business.

@Account Closed  Hello Krystal. Great question you posted. My answer to your question is a question for you. What do you want to do?  What is your goal?  Honestly ask yourself those questions, and proceed from there. You can do anything, but you must know what you want to do and where you want to go. In between those two points is the the area to figure out and get help along the way. 

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Thank you @Victoria Winters  

I would like to start with wholesale. I just didn't know whether I should consider starting as a bird dog first, in order to learn the very basics, or not? 

Originally posted by @Ned Carey :

Liability issues because you did not disclose something you should have.

 I can see this being very risky if you go the double close route since you would be on the hook to disclose anything you know or should know about as the "seller" of the property.  You can get around that with contract assignments but they have their own issues.

@Account Closed  Keep in mind, wholesaling does carry with it some costs. You will need to have some sort of budget for your marketing otherwise where will you find your deals?  

Originally posted by @Omid A. :

@Account Closed  Keep in mind, wholesaling does carry with it some costs. You will need to have some sort of budget for your marketing otherwise where will you find your deals?  

Pulling up an old post here, but I'm also curious about lawyer fees. Don't most wholesalers have an attorney write up a contract that allows them to assign a property and minimize their own liabilities? I, for one, wouldn't go into a wholesale deal (especially with little or no money in reserves) without a solid contract to keep me from having to purchase the property should I fail to find a buyer. Any idea what it typically costs to have a contract written up?

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