Many experts will tell you that wholesaling is the best way to getting into the real estate business. In fact, I have said this same thing on many occasions. The reason this is common advice is, if you know what you are doing you don’t need cash or credit to be successful. The problem I see is that many wholesalers don’t know what they are doing. If you don’t get educated on how to wholesale correctly, or you just don’t know how to put a deal together, you might want to consider being a bird-dog.
A wholesaler is someone that finds great real estate deals and sells them to other investors. Most of the time these are beat up houses that need rehabbed. Often times these are sold to experienced investors that want to fix and flip them.
Bird-dogging is finding a great deal and just turning the lead on to someone you can trust. It is really that simple. You get a lead on a deal and you call an experienced investor to take it on. If the investor is able to make money, they should happily share some of their profit with you. Bird-dogging takes no money or credit, it carries no risk, and you don’t even need to know what you are doing.
Bird-dogging is not only for those deals you don’t know how to structure. One of our clients is fairly knowledgeable when it comes to deal structure, but he found a great deal listed in the MLS that needed an all cash offer. He does not have the cash to make an all cash offer, so he was unable to get the house under contract. Instead of just moving on to the next deal, he called us thinking that we might be able to help. I made the offer the same day and got the deal. I ended up wholesaling the deal to another client and paid a bird-dog fee of $1,000. Now $1,000 might not sound that good to you, but he had less than 30 minutes of his time into the deal. Would you be happy making $2,000 an hour?
I love wholesaling and strongly recommend you use it as a way to produce cash flow. There are, however, two problems that I see inexperienced wholesaler s make. They either get a house under contract incorrectly and/or they don’t pay attention to their deadlines. The deadline problem should explain itself and is easy to avoid. Be sure you have a buyer for your wholesale deal before your earnest money is at risk. As a wholesaler, your only risk is your earnest money, so you need to stay within the contract deadlines or you could lose your money. The contract issue is a bit more complicated, but the most common errors I see are making offers in your personal name or writing assignable contracts and sending them to banks. Please see the next article in this newsletter for more information on how to write your offers.
If you don’t know how to put a deal together but you feel like it is a deal, please don’t let it go to waste. Call us or someone else you know to help you out. You will most likely have to share your profit or simply collect a referral fee, but it is better than not doing the deal at all. It is also a great way to start getting real world real estate experience.