Real estate bird dogging, also known as wholesaling real estate, has become an increasingly popular way for people to make money in real estate without having to invest large sums of capital. The basic premise of bird dogging is to find discounted properties, get them under contract, and then assign those contracts to real estate investors for a fee. This allows the bird dog to make money from real estate without owning or rehabbing properties themselves.
But is real estate bird dogging actually a legitimate business model or just a get-rich-quick scheme? Here we will examine the pros and cons of bird dogging to determine if it can actually be a viable way to earn income.
How Does Real Estate Bird Dogging Work?
Here is a quick overview of how real estate bird dogging works:
- Bird dogs search for discounted or distressed properties that are priced below market value. These can include foreclosures, short sales, probates, or motivated sellers.
- They put these properties under contract by making a low offer that the seller is likely to accept. The contract specifies an assignment clause allowing the bird dog to assign it to another buyer.
- Bird dogs find real estate investors who are looking for good deals on properties. They sell them the assignment contracts for a fee – usually around $5,000-$20,000 per deal.
- The investor takes over the purchase contract and closes on the property. They now own a discounted property they can rehab and resell or rent out.
- The bird dog makes their fee without ever having to buy, own, or rehab the property.
On the surface, this seems like an easy way to make quick money in real estate without much risk or work. But is it really that simple?
The Pros of Bird Dogging Real Estate
There are some advantages that make real estate bird dogging appealing for certain people:
- Low Barrier to Entry – Becoming a bird dog has a very low upfront cost. No real estate license is required in most states and little to no capital is needed to get started. This is appealing for those new to real estate investing.
- Be Your Own Boss – Bird dogging allows for a flexible schedule and the freedom to work for yourself. For some, this lack of a 9-5 schedule is a major advantage.
- Profit from Your Time – Unlike owning rental properties, bird dogs make money from their time spent finding deals, not from assets or capital investment. This can mean higher hourly earnings.
- Learn Investing – Bird dogging can be a good way to get experience and learn the ropes of real estate investing without much risk.
These advantages have made real estate bird dogging a popular side hustle or alternative career path for many people.
The Cons of Bird Dogging Real Estate
However, there are also some potential downsides to be aware of:
- Commissions are Small – The typical bird dog fee of $5,000-$20,000 might seem nice, but much of that get eaten up in taxes, overhead, and the time/effort put in. The hourly rate often works out to be low.
- Inconsistent Income – There is no steady paycheck as a bird dog. Month-to-month income can fluctuate wildly based on how many deals you can find and close.
- Not Passive Income – Some people mistakenly assume bird dogging provides passive income. But it actually requires very active, consistent work to find deals, build a buyer list, negotiate contracts, etc.
- Lots of Competition – Being a bird dog has gotten very competitive, making it harder to find discounted properties that investors will buy.
- No Long Term Wealth – Unlike owning rental properties, bird dogging does not build equity or assets over time. The income stops as soon as you stop working.
These cons mean bird dogging might not be the path to quick, easy money that some may expect. It requires hustle and market knowledge to be successful and consistent.
Is Bird Dogging Legal?
An important question surrounding the legitimacy of real estate bird dogging is – is it legal? The answer is generally yes – with some caveats.
Bird dogging itself is perfectly legal. There is nothing illegal about finding discounted properties and selling contracts to investors. However, there are some legal grey areas to watch out for:
- Some states require a real estate license if you earn commissions from buying/selling multiple properties. Research your state’s licensing laws.
- You must disclose that you don’t represent the buyer or seller as an agent. Acting as an unlicensed agent illegally can get you in hot water.
- Misrepresenting the condition of a property or making false claims to a buyer could constitute fraud.
- Ensure your purchase contracts clearly allow assignments and don’t mislead sellers about your intentions.
Overall, bird dogging is legal if done ethically and transparently. But you must educate yourself on real estate laws and operate with integrity. Unethical or illegal activity could result in major legal headaches.
Is Bird Dogging Profitable?
Whether real estate bird dogging is ultimately profitable or not depends on your ability to consistently find discounted deals and motivated buyers. This involves in-depth real estate market knowledge and strong sales skills.
Many aspiring bird dogs fail because they underestimate how much hustle is required. Some key factors impacting profitability include:
- Your Market – Bird dogging only works if home prices and demand allow for profitable wholesale deals. In overheated seller’s markets, it can be quite challenging.
- Sourcing Deals – Are you skilled at finding discounted properties before anyone else? This takes diligent searching, networking, cold calling, and more.
- Buyer Relationships – Flipping contracts requires maintaining a large roster of real estate investors ready to buy. This takes significant relationship building.
- Negotiation Abilities – Can you negotiate profitable contract terms with motivated sellers?
- Closing Knowledge – Do you know how to ensure dealings meet all legal and title requirements?
A successful bird dog needs to excel at each step of the process. It’s not a simple business model even though it may seem like it from the outside looking in. But savvy real estate entrepreneurs can absolutely make good profits if they put in the hard work.
Is Bird Dogging Ethical?
Another concern around the legitimacy of bird dogging involves the ethics of some practices. There are a few areas where the lines can getblurry:
- Transparency – Not disclosing you will assign a contract and misrepresenting intentions to a seller raises ethical issues.
- Fair Pricing – Offering far below market value to capitalize on a seller’s lack of knowledge may be legally fine but still feels unethical to some.
- Follow Through – Flipping too many contracts without vetting buyers carefully can leave sellers in difficult positions.
- Hard Selling – Pressuring or intimidating vulnerable sellers into agreements breaches ethical duties.
Bird dogging exists in a grey area. To maintain proper ethics, bird dogs should:
- Fully disclose process to sellers upfront.
- Make fair offers in line with true property condition.
- Only sign contracts with ready, vetted buyers.
- Avoid predatory behavior towards distressed sellers.
Like any business, there are ethical and unethical ways to bird dog. Following best practices helps legitimize it as an occupation.
Is Bird Dogging Right for You?
So is real estate bird dogging ultimately a legitimate business model? In the right circumstances, yes – it can absolutely be profitable and ethical. However, it has downsides and is not right for everyone.
Bird dogging is best suited for those who:
- Enjoy networking, sales, and negotiating deals
- Are willing to work hard with no guaranteed payday
- Have flexibility and can invest serious time into it
- Want to learn investing with lower risk
It likely won’t work well for those wanting passive income or unwilling to put in long hours. While the barriers to entry are low, the path to success is still very challenging.
The key is going in with full awareness of what bird dogging entails. With realistic expectations, strong motivation, and ethical practices, it can be a legitimate business model. But without due diligence, market knowledge, and the right skills, attempting it could lead to frustration and failure.
Conclusion
Real estate bird dogging certainly faces skepticism from some as to its legitimacy and profitability. In today’s competitive market, succeeding is harder than ever. However, the fundamental concept of finding discounted deals and selling contracts is a solid one. With proper expertise and effort, bird dogging can be an ethical, rewarding endeavor. But it’s important to avoid unrealistic expectations of quick passive income. Going in with your eyes wide open and making connections in your local market is the key to making bird dogging a fruitful side business or career.
