That’s right. I said it. S-C-A-M.
If you are unaware of what a bird dog actually is, here is a definition I found from Investopedia.com:
A real estate investing term that refers to someone who spends their time trying to locate properties with substantial investment potential. Usually, the intent is to find properties that are distressed and selling at a discount that can be repaired or remodeled and sold for a sizable profit. Sometimes, however, the term is also used to refer to people who find underpriced properties that would make good income (rental) properties.The term itself is a reference to hunting dogs that would point to the location of birds and then retrieve them once the hunter had shot them.
This definition may sound familiar to another strategy (good eye!), but I don’t want to cross that bridge quite yet. Let’s first talk about a few different other things. The reason I am calling the concept of being a bird dog a scam is because it is one of the favorite sales pitches of those real estate gurus. I’m sure you’ve heard it before…
No money needed and No risk… all you do is collect your finder’s fee.
It’s time now to deconstruct this sales pitch. I will do this in sections, and then wrap things up showing just how sly these gurus can be.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Problem #1: You Need to Produce Deals
While I understand this is completely obvious, many over look this simple point. In order to collect the classic “bird dog fee”, you need to bring something of value to your end client: the real estate investor. Herein lies the problem.
I’m going to use personal experience from this. I’ve had numerous people contact me who ask if they can be a bird dog for me and locate deals. It’s no risk to me since I would never pay until I had a deal in hand, so of course I’m going to say “Yes, I’d be happy for you to be a bird dog for me”. I’ve had people from both in my area, and then out of my area (in fact, some that are in different states!) request to be a bird dog. No matter where they are from, they all have produced the SAME exact result.
This result has been so consistent, that now when people ask if they can be my bird dog, I have a boilerplate response I give them, and so far 100% of them I’ve never heard back from. So what is this result?
They send me listings from the MLS. Bluntly put, this brings NO VALUE to the table. I am a licensed real estate agent, so the MLS is my home. Even if I wasn’t though, anyone can log onto a local Realtor site and do a search.
Bottom line: you need to bring value to your client and surfing the properties that everyone and their brother have access to is not going to add any value.
Problem #2: The Risk of Locking in Payment
Let’s say you do find a deal for someone. How exactly are you “sure” you will be paid. As much as I wish I could say a “hand-shake-agreement” would be good enough, unfortunately in this day and age, those sorts of agreements aren’t worth too much.
You’ll want a good contract. In order to have a good contract you’ll need a good attorney. In order to get a good attorney you’ll need money… hey wait! I thought this strategy said no money needed?!?!?
Problem #3: The Semantics Game
Earlier in the article I hinted that you may have thought the definition I posted sounded like another well known real estate investing strategy, in particular: wholesaling. It is my contention that “bird dog” is just a new phrase used by people trying to sell courses so that they can avoid the word “wholesaling”.
As people begin to realize “wholesaling” does indeed take money, there needs to be another avenue for people to imply “no money needed”, and that seems to be this whole bird dogging concept.
In reality, in order to be a valuable bird dog, you need to find solid deals. In order to find solid deals, you need to market for them yourself and negotiate with the motivated seller…. so that, when you bring the deal to your end client, they will be more than happy to pay you. On top of this, to ensure you get paid, you will want some sort of mechanism that protects you.
- Need to do marketing yourself to find properties and motivated sellers (sounds like a wholesaling gig)
- Need to turn these properties into actual deals by negotiating with seller (sounds like a wholesaling gig)
- Need to eliminate the risk of not getting paid, and a good way to do that is to charge a fee to assign your interest to someone else (sounds like a wholesaling gig)
Do you see where I’m going? You can’t be a good bird dog without doing the steps above, and these steps are just describing what a wholesaler does.
There is no way to enter into real estate and make money without spending money. Unfortunately, sending real estate investors properties already listed on the MLS and then trying to collect a finder’s fee is going to be quite the daunting task.
I’ve seen some people say they pay their bird dogs to go and take pictures and such of properties; however, I’d argue that is the incorrect use of the “definition” of a bird dog. I’d say paying someone for that sort of thing is more like a “real estate assistant” job, not “bird dog”.
The point I hope I’ve driven home is that if you are planning on being a bird dog, you might as well plan on becoming a wholesaler since the only way you will ever be able to become a quality bird dog is by using wholesaler techniques.
Despite what those trying to sell courses may say, there is no such thing as an “easy – no money down- real estate strategy”… bird dogging included.
Photo: Vince Viloria