Good Bird Dogging Info?

I found this write up and just want to verify that it is actually good advice.



Birddogging 101
For the purpose of this post the term Birddogging and Flipping will mean the SAME thing.

DEFINITION: A Birddogger is someone who identifies a good real estate investment opportunity and puts the property under conctract with the sole intent of assigning that contract for a fee to a rehabber to repair and resell.

With that in-mind 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 it for them...no one closes you don't get paid and you wasted your time.

Another problem that I see happening all to often is that 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 preceeding paragraph. No Profit.

With all this being said 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 Sales listing 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 avg Days On Market(DOM).

When you estimate the selling price (to see if there is enough room in the deal for everyone) please use the Lowest or Average selling price per square foot not the top end. "Real" Rehabbers will want to sell the property fast (at a discount) since they are often paying Hard Money 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 effect 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 upto $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 improtant 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 someone who is going to flip it again. If it gets flipped again the odds are good that you have wasted your time and the deal will not close.

Use a TREC contract. WHY? Because the rehabber will proabably need to borrow the funds to purchase/repair the property and the Hard Money Lender/Bank will want to see a REAL real estate contract.

I know that many of you think that I am asking too much of you. You want me/us to pay you $2000 - $3000 dollars for finding a deal. I/we want you to only bring us deals worth looking at otherwise we have both wasted out time. I have spoken to may "REAL" Rehabbers over the last few days. People that can and do actually close on deals every week/month.

We are all frustrated by the type of deals that are being offered to us and consequently these deals are NOT getting closed...by anyone! 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. Treat this like a business and don't try to assign something that no one wants to close on.

A typical deal by the numbers (this is how I and many "real" Rehabbers look at a deal)

Max Selling Price* : $150,000.00
Acquasition Cost** : - $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%) : - $7,500.00
Max Purchase Price : $91,100.00
Additional out-of pocket amount : $7,500.00
(Not covered by loan)

FYI: Max HM Loan amount**** $105,000
* based upon selling it fast and based on the low to avg selling price/sqft
** Title work, Dwelling Ins., Loan Fees & assignment fees
*** Listing with someone like ****Must Reach Senior Investor status before posting URL's*** for 3% plus $500, Closing costs, etc.
**** Hard Money Lender loan amount 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 everyone of your deals by only doing delas that can be bought by a real rehabber.

This post may seem a bid harsh to some of you. I don't want to insult anyone or hurt anyones 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!

Comments(5)

  • c-brainard4th November, 2003

    I only read the first two paragraphs. The author is obviously confused. Bird dogs DO NOT put properties under contract. The function of a bird dog is to be the eyes and ears of an investor with $$$. The bird dog is paid for his leads, and has no financial or legal involvement in the property.

    If you actually put the property under contract and try to assign it, you would be considered a flipper (or wholesaler I suppose).

    If you're new to real estate, stick to bird dogging. Find an investor who has a little experience and learn the process before you commit to a contract. If you don't know what you're doing, you will end up wasting everyone's time and money, and you'll be stuck with the property or letting your option money go.

    -Chris
    [addsig]

  • boyd44444th November, 2003

    I agree. Anyone familar with hunting knows the dog only fetches. The hunter goes in for the kill.

  • SeniorC4th November, 2003

    That's what I figured. This post confused the heck out of me, which made me ask the same question on another forum. Then isn't this guy just a wholesaler? What does he need the investor for if he put it under contract? Nobody answered on that forum so I posted it here.

    Thanks guys.

    I

  • boyd44444th November, 2003

    A wholesaler is a birddog with a gun. You just have to make sure he's a good shot.

  • boyd44444th November, 2003

    THE difference between a bird dog and a wholesaler....
    Bird dog gets payed for finding the property.
    Wholesaler gets payed for negotiating a good deal.

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