FORECLOSURE FOOD CHAIN: How to Make Money as a Bird-Dog: Foreclosure Food Chain (Part 1)

How to Make Money as a Bird-Dog: Foreclosure Food Chain (Part 1)

How to Make Money as a Bird-dog
This is the 1st post in the series about the Top 10 Ways to Profit from the Foreclosure Food Chain. This post, courtesy of www.foreclose.com, shows you how you can make money as a bird-dog.

What is a Bird-dog?
A bird-dog is someone who finds out information about homeowners and their properties, passes that information on to investors, and collects referral fees when the investors use the information to close deals. The fees are negotiable between the bird-dog and the investor, and can range from several hundred dollars to several thousand dollars.

A bird-dog is someone who feels comfortable meeting and interacting with people, and learning about properties that could lead to good deals. He or she works with one or more investors to find properties that meet their profit-making criteria (e.g., location, price range, size of discount). A bird-dog focuses his or her time on finding out about motivated sellers and distressed properties, including foreclosures, that would yield nice profits, and in turn nice referral fees.

Why Be a Bird-dog?
The first reason is that bird-dogs don’t put up any investment capital, so there is no risk of losing money. The second is that bird-dogs don’t take possession of the properties they find, so there is no need to spend time and energy managing properties before they are resold or rented.

Being a bird-dog is a safe and simple way to get started in real estate investing. For some folks, this makes perfect sense. If you don’t have a lot of time, or if you find the whole notion of real estate investing to be bewildering, then being a bird-dog is the way to go. You can easily be a bird-dog on a part-time basis, spending as little or as much time as you have available.

All You Need to Get Started
It is actually very easy to become a bird-dog. You don’t need to spend a huge amount of time and money learning the details of the real estate investment business. In fact, you really don’t need to know much about real estate. All you need to know is how to meet investors, how to find properties, how to collect the information, and how to determine whether the properties would make good deals.

Making Money as a Bird-dog
Referral fees can be either a flat fee or some percentage of the value of the deal. There is no standard flat fee or percentage fee for bird-dogging. However, a good range for flat fees is typically $500 to $2,000 or even more, depending on the value of the deal. By the same token, a good range for a percentage fee is typically 0.5% to 1%, again depending on the value of the deal. As an example, the percentage fee for a deal valued at $200,000 would range from $1,000 to $2,000.

The key to really making money as a bird-dog is to establish a pipeline of deals. This is the same principle that sales people use to be successful. So for example, you may only want $500 extra per month. This would require a steady stream of about one deal each month or every other month, depending on the size of the fees. Alternately, you can do a deal here and there to get enough extra cash to pay some extra bills, purchase something nice, or stash it away for a future need.

Four Simple Steps
Bird-dogs make money by following four simple steps. Follow these steps now and you’ll be on your way to making money as a bird-dog.

Meeting Investors. You can meet investors very easily, by using word of mouth to let relatives, friends, coworkers and associates know of your interest in being a bird-dog. They in turn might know of investors looking for deals. You can also take advantage of the boom in Internet social media, and attract even more investors by advertising yourself using sites like Facebook, LinkedIn, Twitter, blogs and online forums.
Finding Properties. You can certainly track down properties advertised as For Sale By Owner (FSBO), and such deals can be profitable. However, you can be even more profitable by finding distressed properties owned by motivated sellers. Such sellers are motivated by financial difficulties, and need to sell their properties quickly to avoid further debt or pending foreclosure.
Getting Information. You can get a wealth of information about the properties simply by communicating with the homeowners. You will need to ask for basic information about the property (e.g., size, age, type, style), and its physical condition (e.g., damage to windows, roof, yard, walls, appliances). You will also need to ask about the debt on the property (including mortgages and liens). Get specifics on the type of information to collect from the Complete Guide to Preforeclosure.
Matching Investors and Properties. Focus on collecting information on distressed properties that match the criteria from the investors you’ve met. Maintain contact with the investors to let them know what potential deals you’re working on, and how far along you are in collecting the needed information. Once you’ve found a good match, arrange a meeting with the investor and close your end of the deal.