Real Estate Investing Blog

Archive for the ‘Bird Dog’ Category

That’s probably one of the most common questions asked by people wanting to begin real estate investing. Another common question is, “How do I find a mentor to work with?” Of course there is no one perfect answer for everyone. It depends on a number of factors including; money available, goals and current skill level. But, for my money the answer to both questions is bird dogging or as I call it Real Estate Jobbing.

A Real Estate Jobber is a person who finds qualified leads for professional Investors, through a variety of sources using a systematic process.

Why Real Estate Jobbing?

* You can start in your spare time.

* There is absolutely zero financial risk.

* There is practically no start up costs.

* You don’t need money or credit.

* You can gain hands on experience without risk.

* You can find out if real estate investing is really for you, before spending hundreds or thousands on books, courses and other learning aids.

Your job is simply to supply quality leads and it’s the Investor’s job to handle the rest of the process.

You Earn While You Learn

For each lead that an Investor is able to close on, you will be paid a referral fee. There are several types of referral fee arrangements that can be made including:

* A flat rate.

* A percent of the purchase price rate.

* A net profit rate.

* Rates that combine more than one method.

Build Mentor Relationships

There is no doubt that mentoring is the most efficient way to learn, but it can be difficult to find a mentor to work with. Do you really think seasoned Investors have time to mentor everyone that asks? Separate yourself, and bring something of value to the table. By supplying good, quality and qualified leads you are saving your Investors time and helping them to make money. Now an Investor will be more willing to help.

Start in Your Spare Time

You can easily start out as a Jobber in your spare time. You don’t have to quit your job; in fact I would not recommend that. You work from home, and you may be able to do much of the lead finding research on-line. Anyone can become a Jobber. There are no special qualifications, education requirements or specialized experience required. Your age, gender, race, background, geography or current occupation does not matter.

The skills you develop will carry over. As you gain experience you will work closer and closer with your Investors, and learn the business first hand. When you are ready to take the next step, you will know how to find profitable leads. As an Investor you must be able to find motivated sellers, that’s one thing that will never change.

What Makes a Successful Jobber?

You must know your Investor’s needs. Know what types of properties, what price ranges and what locations they are looking for, and prefer to deal with. The Investor is your customer, and you must give him or her what they want. The successful Jobber is like a real estate detective. The client is the Investor, the case is to find motivated sellers, the reward is the referral fee and leads represent clues. A good detective will investigate as many clues as necessary to solve the case. Likewise a good Jobber will generate and investigate as many leads as necessary to find the truly motivated sellers. You must provide complete information to your investors. It takes much more than an address and phone number for an Investor to make a decision. The Jobber goes the extra mile and uses the public records and other sources to provide as much information as possible for Investors.

You must be (or learn to be) organized. Jobbers use a systematic approach for generating and qualifying leads. If you are disorganized it will be very difficult to stay on top of your business. Anyone can learn to be organized. It all boils down to providing good, quality information, which saves the Investor time and helps them to make money, that’s the goal of a Real Estate Jobber. If you achieve this goal, then your Investors will be more than happy to help you learn the business, and pay you very well for your efforts.

It’s Not Easy

Real Estate Jobbing is a great, risk free way to start your Real Estate Investing career. You earn money while learning the business first hand. But, it’s not an easy get rich quick program. You will have to put forth some effort to be successful. You will need to generate hundreds of leads, which takes some time and commitment. You will need to look up the property information for each lead and present the leads regularly to your Investors. You must be able to motivate yourself to keep finding leads, even when it seems like none of them are panning out.

Real Estate Investing is not for everyone. Jobbing is an inexpensive way to find out if it’s for you, before you spend hundreds or thousands of dollars on courses, books and other materials. Find out what’s involved first hand, experience the challenges as well as the rewards. You get paid to find motivated sellers while saving Real Estate Investors time and money, all while learning the business; it sure sounds like a win-win situation to me.

No, I’m not talking about starting a kennel and going into the dog business – still talking real estate here. A new concept that I have been using for a while and one that I have seen others effectively use is what I call “Breeding Bird Dogs”. In a nutshell, breeding bird dogs is taking newbie investors under your wing and training them how to find prospective deals. The premise behind training other “would-be investors” to find properties is that they will bring the deals to you before they present them to anyone else. Some may feel as though they are training their competition, but I’ve never looked at it that way. The newbie benefits from this training by learning the ropes of the business, pursuing deals, and getting paid without taking any risk. At some point they may start doing deals on their own, and I’m happy for them. You, on the other hand, through your experience and the training that you provide can have many more eyes on the street locating deals for you.

I have a slew of bird dogs who take to the streets daily searching for deals that they can bring my way. On average I get about five calls a day, sometimes over ten calls a day. It’s like any other method of finding properties where you usually have to get 20 leads to find one deal. When I find that deal, I make sure that the bird dog is paid well for his or her time. It is my goal to make it worth their while to continue bringing the properties to me. That’s why I teach investors how to locate deals. I teach them about putting ads in the paper, driving neighborhoods, putting out signs, sending postcards, etc… When they get calls and present me with deals, I start giving them tips on how to identify deals and tidbits on negotiating a better deal.

Now I do not pay my bird dogs for handing me an address and a phone number. I want them to see the homes. I want them to talk with the owners. I want them to do their best at negotiating the best price they can. I also do not pay for MLS leads. The only time I’ll pay for a lead from the MLS is when someone has the property under contract at a fair price. So if you are interested in raising your productivity a notch, train others how to do what you do, and then treat them well for it.

If You Are Not Doing This Math on Every Deal You Are Considering Putting Under Contract,
Then You Are Not Earning Your Assignment Fee!

Definition

A “Bird-Dog” is someone who identifies a good Real Estate investment opportunity and puts the property under contract with the sole intent of assigning that contract for a fee to a rehabber to repair and resell. For the purpose of this article the term Birddogging and Flipping will mean the SAME thing.

The Scenario

I believe that birddogs are getting as frustrated with the current state of the Real Estate investment market in the DFW area as many rehabbers are. I understand that many of you are professionals who take the time to look at a deal from the perspective of the rehabber and only put a contract on a house that has enough room, after your assignment fee, repairs, holding costs and selling costs, for the rehabber to make a decent profit (typically 15 – 20% of sales price).

I also realize that many of you are frustrated because you will assign a good contract to a “rehabber” who tells you they can close, who then turns around and assigns your contract to someone else who may or may not be able to close. The process takes the profit out of the deal so that if it ever is shown to a “real” rehabber…there is nothing left in it for them… no one closes, you don’t get paid, and you wasted your time.

Another problem that I see happening all too often is that there are new birddogs that don’t have a good understanding of this business yet are out-bidding the “pros” for the property without taking into account all of the cost associated with rehabbing/selling the property. Then, what could have been a good deal for all ends up either not closing, because a Hard Money Lender will not fund enough or a “real” rehabber will pass on it for the same reasons listed in the preceding paragraph. NO PROFIT!.

So I want to try again to help the new birddogs and those “pros” that are getting frustrated because their contracts are not closing, see what they can do differently to ensure that most if not all of the properties they place under contract will be assigned and will close.

Rob’s Rules to Birddogging:

* Treat this like a real business: This means you may have to make an investment in your business in order to make money. If you want to earn a $2000 – $3000 (or more) assignment fee you had better do the leg work required for a rehabber to quickly evaluate your deal.

* You need to be able to estimate repairs accurately,(within 20%). If you can’t, then how will you know if a deal IS a deal?

* You need to know how to “comp” a deal. This does not mean that you grab the other For Sale listings in the neighborhood and call those prices “comps”. It means you will need to use the Dealinator or other service to see what the recent SOLD Comps in the subdivision are and what is the avgerage Days On Market(DOM).

Use the Lowest or Average selling price per square foot when you estimate the selling price to see if there is enough room in the deal for everyone. Please don’t use the top end as “Real” Rehabbers will want to sell the property fast, at a discount, since they are often paying Hard Money Loan rates. That means they will look at the potential selling price based upon the Low to Avg Selling price of the Comps.

* Understand how Holding Cost affect a deal: If I am buying the house for $100,000 plus your $2500 assignment fee + $7500 in repairs that means I may be borrowing up to $110,000 from a Hard Money Lender. At 14% Annual Interest that house costs me $1283.33 every month I own it. This is why the DOM is so important for you to know when you are evaluating a deal. You need to know that if the Avg. DOM is 90 days….your rehabber will need to spend $3850 in loan payments (using the above example). That amount needs to be calculated in the deal.

* Only assign your contract to a “REAL” Rehabber not to someone who is going to flip it again. If it gets flipped again the odds are good that the deal will not close and you have wasted your time.

* Use a TREC contract. WHY? Because the rehabber will probably need to borrow the funds to purchase/repair the property and the Hard Money Lender/Bank will want to see a bonafide Real Estate contract.

Treat this like a business and don’t try to assign something that no one wants to close on. I have spoken to many fellow “REAL” Rehabbers, people that can and do actually close on deals every week/month, and they agree that if you you want me/us to pay you $2000 – $3000 dollars for finding a deal then I/we want you to only bring us deals worth looking at otherwise we have both wasted our time. All we are asking of you is that you spend an hour or less doing your “Due Diligence” before you put a contract on a house that you want to later assign.

A Typical Deal By The Numbers

This is how I and many “real” Rehabbers look at a deal;

Max Selling Price 1: $150,000.00
Acquisition Cost 2: – $7,500.00
Repairs (estimated) : – $9,000.00
Four month Average. Hold Cost : -$4,900.00
Min Profit (15%) : – $22,500.00
Misc expenses (5%) : – $7,500.00
Cost to Sell (5%) 3: – $7,500.00
Max Purchase Price : $91,100.00
Additional (Not covered by loan) expenses : $7,500.00

1 Based on selling it fast and based on the low to avg selling price/sqft
2 Title work, Dwelling Ins., Loan Fees & assignment fees
3 Listing with someone like MyCastle.com for 3% plus $500, Closing costs, etc.
FYI: Max Hard Money Loan = $105,000 based on a max of 70% ARV

If you are not doing this math on every deal you are considering putting under contract then you are not earning your assignment fee. This is a business. Like every business you are only paid when you sell your product or service. Make sure you sell every one of your deals by only doing deals that can be bought by a real rehabber.

I don’t want to insult anyone or hurt anyone’s feelings. You may not agree with what I have said. But believe me when I tell you, if you want to sell a deal to me or 99% of the other “real” rehabbers that can close…you will need to keep what I have said in mind. I do this same math on EVERY deal I look at buying…if it doesn’t work…I walk!