Should you start your real estate investing career as a bird dog?

One of the most frequently asked questions I get is, “How do I get started investing in real estate?” This confusion comes in part from so many options and courses offered to newbies. They range from wholesale to buying commercial property and everything in between. So where should a new investor start?

Newbies are sometimes recruited by experienced investors to find properties for them. These seasoned professionals advertise on road signs, in newspapers, and online. His message is direct and something to do with making $10,000 a month or more as an apprentice to a real estate investor. Often the types of learning and specific tasks are not revealed until the newbie takes a closer look at what the job offer is all about.

The name “bird dog” comes from the fact that trained dogs are used to point out various upland game birds such as quail or pheasant in the undergrowth before a hunter can see or hear them. These bird dogs stop when they smell or hear a bird and freeze in a pose so the hunter can move forward and pull the birds in for a shot. Bird dogs in real estate investing eliminate prospect property sales based on criteria given to them by their seasoned investor.

The advantages of being a bird dog investor are that you will learn one or a few specific prospecting techniques to find motivated sellers. These often include techniques that the investor does not want to do themselves due to the danger, inconvenience, or dull repetitive nature of prospecting. Common examples are knocking on doors in potentially dangerous neighborhoods, hanging fliers on doorknobs, pre-qualifying homeowners from another major system, scheduling appointments with homeowners already found by the bird dog, or driving for dollars in undesirable neighborhoods.

Driving for dollars is simply the process of driving street by street in a specific neighborhood, finding properties that are overgrown or appear abandoned, and then following the leads to find what is expected to be a motivated seller. In my experience, my offers have been found by searching for dollars more than any other single source of prospecting; in our system, it represents more than 40% of our offers.

Hunting dogs will be required to take pictures and possibly investigate to complete an information packet to give to the investor to follow up and purchase the property. If that completes, the investor will sell it at a profit and the bird dog will be compensated.

Compensation can be in the form of a fixed amount for each lead, or a percentage of the profits from the deal; earnings are defined as determined by the investor. In most states, a percentage of the gain is considered compensation for an unfair interest in the property. This legally means that the bird dog must be a licensed real estate agent, so check how this will be handled to avoid regulatory issues. If the bird dog is a partner in the deal, such as in a signed contract in effect, this should outweigh the commission issue, but always check with a local real estate attorney to stay out of trouble.

The investor who hires a bird dog knows that the better trained he is, the less likely he is to continue working for him. Even if the investor files a 1099 income statement with no tenure for an independent contractor, the bird dog is his employee. The investor will minimally train the bird dog to grunt hard work and eventually the bird dog will stay by the wayside due to lack of income or leave only when he understands that he is not earning enough for his efforts.

For example, if the investor pays $10 per prospect with photos and all research done from public records, and does so for 100 houses, they will earn $1,000. However, if the investor knows what he is doing, he will close and make a profit of at least $10,000 on 5% of the properties. This close ratio could be as high as 20% if the guide dog did its job correctly. So the bird dog makes $1,000 and the investor makes between $50,000 and $200,000, seems blown out, doesn’t it?

The bigger question is what happens if the bird dog is injured on the job and needs medical benefits, who pays his overhead, how much he actually makes, and can he track sales if he’s a deal partner. I met a hunting dog full time when he was on a property that had been prospecting for two years for an investor and was told his prospects never turned into businesses. This is absolutely impossible, but he kept working to cover his expenses and hoping to become an investor one day.

It is better for the investor to continue recruiting newbies and letting them go than to turn them into true trainees at the risk of them becoming your next competitor. The prospecting techniques that “master” investors teach bird dogs are ones that anyone can learn in a day. The main problem for someone entering the business is selling the properties under contract and that can be as easy as finding the sellers. If you try to hunt birds, be prepared for the unexpected and be careful.