Anyone who has considered real estate investing when they are cash-challenged has probably read about becoming a “bird dog.” This activity is said to be both a great learning tool to get your feet wet in real estate and it’s something you can do at the basic level without investing any cash of your own. Let’s take a look at how bird dogging works first.
Basic Low Involvement Low Return: At this level you’re simply locating possible deals for real estate investors. You’re not doing any deep research into the viability of the investment, instead simply giving them an address of a property that seems to be either vacant, in pre-foreclosure, or a bargain buy because the homeowner is in a distressed situation. At this level you’re basically just providing addresses and they’re just leads to the investor. They will give them a quick look, toss most of them, research a few, and maybe even act on one or more.
Of course, you’re not going to get paid a lot for this, but you’re not really spending any money, other than the vehicle cost to drive around and look for these opportunities. You may find an investor willing to pay you $25 or $50 each for these leads, but if you don’t deliver a good one now and then, your income stream will dry up. There is probably more hype about the opportunity for you at this level than there is true income, but there are investors willing to pay for leads like this.
Do More Research – Earn More Money: There are partnerships between property locators and very active investors that could be called a bird dog relationship, but they’re much more than the basic lead-locator level activity. If you can become a really effective resource for investment opportunities that aren’t yet discovered by the competition, you could enter this more elite group. The other requirement is that you do more research, and even do some basic qualification of the property as a good candidate for a flip or long term rental investment.
One very effective team consists of an extremely active and well-capitalized investor who pays his property locator $1000 per deal! Of course, the investor has clearly outlined their criteria for properties, locations, and their desired profit margin. The locator person understands the math and valuation information required to determine what makes a good deal, and they do the research necessary to bring only really good opportunities to the investor. Two out of three or more of these deals get done, and the investor pays when they close.
In reality, you can probably count on a few hundred dollars in most cases, but it’s all about the requirements of the investor and your ability to bring them deals that their competition hasn’t discovered, allowing them to cut a great purchase deal and realize their profit goals.
So, the answer to the first part of the question in the title is that there is indeed a viable opportunity in becoming a bird dog for one or more active real estate investors. As for the second part, should you do it, that’s up to you? It’s a low level investment in dollars, but it will take some time and study to get involved.