Hi all, I want to know as a skeptic, does this "Flipping business really work? I see this so much in my area & would love to try something new! I have contacted some leads in my area just to see what they say & true enough the sellers will tell you whatever you ask of them. So I have 2 sellers, but I don’t know where to get the contracts/assignments from & I don’t have a Rehabber/Investor, so I feel like I have wasted these peoples’ time as well as mines just because I’m curious or new & starting out & don’t have the proper paperwork or professional contacts in line. Then do I need to go & see these properties or do I just turn it over to the Rehabber/Investor when if ever I get 1? Also, do I give the Rehabbers/Investors any information on these people, because I could tell the clients names & address & phone# & ect & they could go & get the sell themselves and I’d never know, so what do I actually say to them? Thanks again!
I’m just looking into this as well. I’ve been a realtor for a little over a year now and I’m tired of making other people money while getting my perceived HUGE commissions. I’m skeptical about the whole bird dog concept… how I perceive it works is as follows:
1)you have to get a contract accepted at a below market price with a extended closing date and very little earnest money with an out clause.
2)you have to resell your accepted contract, before the closing date, to an investor or another 3rd party.
3)you have to make sure the home owner doesn’t go apeshit when they find out what you’re doing and how much money you are going to make.
4)the legality of this is somewhat unclear to me, as I could probably loose my lic if I did some of these things. It is also illegal for a non-broker to sell a house for a commission in my state unless its their home or one they are buying. however I believe this would be a loophole.
This might work I don’t know, however if I ever saw a contract with these terms I would advise my clients against it. The norm here is 30 day contract, with most of the out clauses expiring after the initial 10 days. deposits are normally around 1% but nothing is written in stone and every buyer does it different.
I could have the whole concept screwed up, I just found this site yesterday. I am interested in making money without having any, as I cannot secure a normal loan without 2 year employment history. plus I’m young and have no credit. I’m leaning more towards owner financing or a lease purchase. Best of luck and maybe someone with more knowledge can explain it better
newjobs,
If you’re still asking “does this flipping business really work?” then it was probably a bad idea to call on sellers just to test the waters. It’s worse if you’ve actually promised these sellers anything, since you really don’t know what you’re doing yet.
At this point, the best idea for you would be to call on some of those “we buy houses” type ads (or something similiar like “avoid foreclosure” “sell your house fast” etc) and see if any of those investors would be interested in these properties. You could also look up your nearest REIA group (click on the “real estate clubs” link under Investor Resources on the left) and if a meeting is close, attend and possibly find an investor there.
At this point, you’re not ready to wholesale, or “flip,” property. If you get ahold of an investor, tell him what you’ve got, and see if they are interested. Most investors will pay $250-500 for a birddog fee (a birddog is someone who finds a potential deal and shows it to the investor) IF they buy the property. At this point, however, it would be better for you to just give the lead to them in exchange for some learning. Ask if you could sit in on the investor/seller meetings and if it goes through, follow the deal through.
Yes, it’s true that the investor could go behind you and get the deal without paying you (either with $$$ or education), but if they are good investors, they won’t. It’s in their best interest to treat you right because if they do, you’ll bring them more deals. If you get a bad investor that does things wrong, then you’ll know NEVER to do another deal with them. Simple.
FL Ben,
Yes, you have things a little mixed up.
Birddogging is when you find a potential deal for an investor and refer that deal to them. As a birddog, you do NOT put anything under contract and you do NOT do any negotiating on the deal. You merely find properties that have the POTENTIAL of a good deal. It’s the investor’s job to actually make the deal.
Wholesaling, or as some call it “flipping,” is where you get a property under contract and then either assign or quickly resell it to another investor at a price where that investor can then fix it up, and retail it for a profit themselves.
I don’t know your state’s laws concerning RE agents, but I doubt that you could become a birddog since you have a RE license.
Wholesaling is still a possibility, but again, as a RE agent, you have to fully disclose EVERYTHING, so it will be much harder for you. However, wholesaling, done properly, is fully legal, so you don’t need to question it. Education is the key.
And since you mentioned the legality of a non-broker/agent:
As a birddog, you are selling the information about a potential deal, not the property itself. At no time should you ever become a principle (buyer or seller) in the transaction and at no time should you ever try to be an agent (where you negotiate price/terms between the principles) in the tranaction. It is the investor’s job to call the sellers and discuss price/terms of the deal.
As a wholesaler/investor, you do become a principle in the transaction. In the first transaction, you are the buyer. The homeowner is the seller. In the second (wholesale) transaction, you are the seller, and the investor/retailer is the buyer. IF you assign you contract (not closing yourself on the deal, but assigning your position in the first transaction as the buyer to the investor/retailer), then you are selling your position in the contract, which is legally yours to sell. In the first case, it’s YOUR house. In the second case, it’s a house that you’re buying. Both of which you said was legal in your state.
And for any others that are considering getting into REI:
Very few people would ever take a job or start a career without having some idea of what is involved in that job and/or a basic understanding of the job. I would think that since real estate investing is a risk/reward career and done poorly, could cost you money and/or your credit, that one would treat it with at least the same amount of respect as a career change.
Sorry for the small soapbox.
Hope it helps, and good luck
Raj
Great post Roger J… this is exactly why I’m building up a real estate referal business (a.k.a. jobbing, bird dogging) so that I can make money on the side as I gain more knowlege in regards to REI. I have some basic knowlege on how deals are done, but I have no clue about the contracts and how the process works. Another thing I like about building up the referal business is that it gives me the opportunity to build up a network of investors that, when ready, I’ll be able to flip deals to instead of just refer deals to them as a bird dog. Also, as a bird dog I am learning the skills to seek out leads, acquire the property owner info, figure out FMV & learn the business from the ground up.
RREIA
Raj, thanks for clarifying the roll of a bird dog. I do basically the same thing on occasion as most realtors do. We all keep list of private sellers, the details of the property, and what commission if any they are willing to pay. I was assuming bird dog, wholesaling, and flipping were all the same thing. :
what I don’t understand is why would someone bird dog when you could do the same thing as a realtor, plus a lot more. The pay is a lot better too. I guess my concerns are more related to the flipping, wholesaling, or re-assignment of a contract. I see re-assignments all the time, but they are always on new construction. I still wonder about the legality of a bird dog also… If I as a Florida license agent give someone info about houses in Alabama for a fee I’m pretty sure I would get in trouble… although the penalties for a non-licensed person are almost non-existent, and who would ever know anyway. I’m not allowed to pay referral fees to a non-licensed person, however anyone who says that doesn’t happen is full of it.
Ben,
You’re welcome. However, if you think that a RE agent and a birddog are basically doing the same thing, then you haven’t fully grasped what a birddog does.
A birddog sells INFORMATION. As stated, they find potential deals and refer that information, for a fee, to an interested investor. It is the investor’s job to actually make the deal happen.
A RE agent represents a buyer or seller (and in some cases both) in a real estate transaction. Their job is to get their client the best deal possible. They collect a commission for there services.
You’re also probably right about you, as a licensed RE agent, getting into trouble by birddogging, however, you’ll have to review your state’s laws to be sure.
Birddogging, done correctly, is perfectly legal. “Done correctly” it seems, is the tricky part.
Hope it helps,
Raj
I understand that a bird dog just gets paid for collecting and selling the info to the investor. However, that’s the hardest part of this job. Well, getting the homeowner to pay the commission is the main hurdle. This way it makes the buyer responsible for paying the commission/referral/fee or whatever you want to call it. I think its a great deal for the investor, I imagine most realtors would pay for the information as well. I get tons of email referral offers by email. They all want their money upfront, sell it to numerous people, and don’t guarantee if the phone numbers are even real.
A bird dog could do the same thing they are doing now as a realtor. I think you could call most realtors and they would give you the name of a couple of good priced houses that they had given up on, if they believed you would pay them a fee upon closing. I’m sure most would give you the line of they want 3% or whatever. Of course they will try to get as much money as possible. For example, most realtors convert a very small portion of the fsbos they go after. If its a good deal and they know it will sell, might as well make something of it. I’m sure most of the realtors with the capital will snatch up the steals, so call that hungry realtor who needs the cash…anyway I’m rambling
You can go to Kinko’s or office Depot to get contracts so that you can finalize the deal yourself. That’s how easy it is.