In a previous article, 5 Ways to Make Money Investing in Mobile Homes, I spoke of five unique ways for anyone with ambition to make money with mobile homes. Over the next few weeks, we will cover each topic in depth. The first and perhaps easiest method to making money with manufactured homes, or any real estate vehicle, is called “bird dogging.”
If you have been investing for any length of time you have probably been approached by a “bird-dog” to inquire if you might use their services. A bird-dog is anyone that brings leads to another active investor for a profit. A bird-dog finds leads by: Driving around town looking for “FSBO Signs”, looking for vacant properties, REIA pitch meetings, Internet ad sites, Newspaper listings, Etc. A motivated bird-dog can be one of your best lead sources.
Whether you are the investor or bird-dog, like any business relationship there are a few things to remember before starting out the gate.
Investor corner: Place yourself into a new real estate investor’s shoes; he/she is apprehensive, direction-less, unconvinced, yet motivated and full of questions. When speaking to a new or seasoned bird-dog, speak in very specific terms. “I am ready to buy manufactured and mobile homes in the North and West side of town, below the value of $100,000 and in any condition. Take pictures and copy down the address, phone number, price and a brief description. Parks must allow children if mobile home is located within a preexisting trailer park. Also look for any residential property with low curb appeal (High grass, boarded windows, etc).”
A trick I have used is to keep a set of nice journal-notebooks in my car trunk. A serious “bird-dogging” action takers get a notebook with attached pen as a gift. This notebook can be used to write down future property info. The notebook also includes my contact information and a list of the current criteria to look for when bird-dogging.
Bird-dog corner: Bird-dogging can allow a newbie investor to make extra money while learning first hand the business of real estate investing. As a bird-dog make sure that you are clear as to the types of properties your investor is actively looking for. Negotiate your commission splits up front; it is common for a bird-dog to get between $500 and $3,000 per deal closed. Do not expect to get paid per lead, investors typically must close before you get paid.
Stay loyal to your investor/mentor. I was actively working with a young bird-dog, named Gus, that had made me 2 prior sales. Gus found a great concrete block home to wholesale for a quick profit in my area of Tampa Bay. I told Gus that I would wrap-up the paperwork side of the deal and for his troubles I would give him either $2,000 cash now, or $5,000 if he was willing to wait until I resold the property for a profit. After I had started the paperwork to close on the property I learned Gus had gotten a higher offer, and instead of talking to me, he decided to go around me and tried to steal the property from underneath me. When I confronted my soon to be ex-bird-dog, Gus told me the other investor offered to pay him $6,000 now. I closed on the property and never again worked with Gus or offered him mentoring.
Closing: Most states have set limits as to how much profit a non real estate professional can earn as a “Finder’s Fee” for a real estate transaction; my home state of Florida’s cap is $50. No bird-dog I know would work very hard at the chance to make $50. It is imperative that the bird-dog’s reward be very enticing to motivate him/her to find you semi-qualified leads. The penalty for anyone in my state paying out or receiving more than $50 as a “Finder’s fee” without an active real estate license may be as high as a 3rd degree felony.
Most investors I have spoke with pay their bird-dogs a generous fee, $500 to $3,000, by creating the original Purchase and Sales Agreement from your seller to your Bird-dog, that’s right the Purchase contract will read from the Sellers to your bird-dog (Gus). Once the buyer on the original contract is listed as your bird-dog (Gus) then immediately have your bird-dog sign an Assignment of Contract, assigning the deal to you for a “Wholesale or Assignment Fee”. Your bird-dog can now be paid out of closing and should be listed on the HUD-1 closing statement.
The goal of an investor/mentor is to develop your investor/bird-dog to a point where they do not need you anymore. It is selfish and naive to think you may keep a driven person in the bird-dog “position” forever. Once the metamorphosis from bird-dog to investor is complete you will hopefully have a relationship that will still be mutually beneficial, through joint ventures down the road.
The goal for a hungry new bird-dog should be to find a leader of integrity and action. Follow this investor/mentor as you would a teacher in school. Do your homework. Pay attention to directions. Be respectful. Ask questions and don’t abuse your friendship. Participate, have fun and go make money.
– J. Fed
Photo: Randy son of Robert