As an investor new to real estate, you’re most likely to consider several opportunities, of which two of the prominent ones are bird dogging and wholesaling. As a new real estate investor, you’ll need to understand the meaning of both concepts.
Both are profitable in their own ways, but let’s look at what they both are and the similarities they share. The following is an investor’s guide to bird dogging and wholesaling. Remember however that real estate can be a complex field, and as you delve deeper into the market it may be wise to consult with a real estate attorney for their experienced legal skills to help you understand any legal jargon and ensure that you stay on the right side of the law.
Read to the end to learn all you need to know.
What Does a Bird Dog Do?
A real estate bird dog’s job includes identifying properties with substantial investment potential for an investor. The term bird dog is derived from the actual hunting practice, where dogs are utilized to locate and retrieve birds gunned down by the hunter.
Generally, bird dogs search for foreclosures and bank-owned properties, most of which are acquirable for reasonable prices. Some of these properties can also include buildings needing renovation but can fetch significant profit as rental properties once renovations are complete.
Before presenting the investors with opportunities, these individuals must do intensive research on listed properties. With people’s increased desire to flip homes, or find rental properties, bird dogging has gained prominence in the real estate market.
Similar to bird dogging is wholesaling. Let’s briefly look at what the term means before having a bird dogging vs. wholesaling comparison.
What Is Wholesaling?
In real estate, wholesaling involves an individual acquiring a contract from the property’s seller, and the same contract will get to a buyer.
Wholesalers act as middlemen to end buyers (usually real estate rehabbers or investors) who wish to avoid spending time identifying discounted properties or negotiating deals with sellers.
You’re probably wondering how wholesalers benefit from these deals. Wholesalers profit through a wholesaling fee (often a percentage of the property cost) attached to the transaction.
Bird Dogging Vs. Wholesaling
As a new investor, understanding bird dogs real estate and its similarities with wholesaling is crucial. It’s often difficult to differentiate between the two terms, considering most real estate experts are unaware of these differences. Both take on the responsibility of identifying undervalued properties, but there are key differences.
One of the major differences between these two is that wholesaling requires more steps than bird dogging. Not only does the wholesaler identify a house for sale, but they also put the property under contract and later assign the same contract to a buyer.
Also, a bird dogger does not need money for a complete transaction, and this is because he trades information. After locating a building for sale, the wholesaler intensively researches the state of the house, the requirements to buy the house, and other vital details.
The information obtained gets to the buyer, who decides whether to buy the property or not. Visit this post for further clarifications in the bird dogging vs wholesaling argument. Now, it’s important to have a clear insight before making a pick in a bird dogging vs. wholesaling comparison; we’ll look at the pros and cons of each sector.
Pros of Bird Dogging
Bird dogging real estate has several advantages, including:
- Investment Without the Risk
Your job as a bird dog is scouting for property deals, not for yourself, but for potential buyers who will shoulder the risks involved in real estate investments.
It’s not unusual for bird dogs to eventually become investors. Still, like a bird dog, you’re a deal hunter who identifies opportunities and presents them before clients who are looking to invest.
- Creates Several Networking Opportunities
As a bird dogger, you must possess an extensive network of potential buyers, property sellers, investors, etcetera. These connections can be helpful later in the future, especially when you desire to play an active role in the real estate market.
- Provides First-hand Real Estate Experience
Experience is an essential part of work. As a bird dogger, as you work with more buildings, you can easily identify great deals, which offers you the opportunity to learn essential real estate happenings.
- Low Start-up Cost
Researching properties and contacting investors doesn’t require upfront costs. Thus making bird dogging an excellent way to identify in the industry without significant capital.
Cons of Bird Dogging
There are several downsides to consider before seizing real estate bird dog opportunities. Some of the cons you should consider are:
- Income Isn’t Guaranteed
Being a bird dog means you’re not on a payroll. Your income depends on how successful you are at closing deals. Therefore, if you’re not constantly connecting investors to properties, you’re not going to earn often.
- Requires Intensive Research
Bird dog techniques hinge significantly on how much information you can obtain during research. Acquiring information is often tedious, especially during the process of contacting the seller.
Also, as a bird dogger, it’s crucial you’re able to differentiate between viable leads and time-wasting deals.
- The Job is Often Demanding
As an investor in a bird dog real estate venture, you should understand that there are times you’ll need to make yourself available 24/7, and this can be a problem if you’ve got other responsibilities.
Pros of Wholesaling
Wholesaling is advantageous in several ways, including:
- Significant Financial Reward
We mentioned that a wholesaler contracts a house and sells it to an interested buyer. The wholesaler sells the building for more than the seller charges, thus making a significant profit from the sale and charging a fee.
- Requires Little Capital to Start-up
One of the reasons wholesaling is a good option for new real estate investors is that it requires little investment capital. So if you’re looking to invest in a real estate venture that requires low start-up capital, consider wholesaling.
- Low-risk investment
Investors are always on their toes looking for low-risk investments, and wholesaling, due to its low start-up capital requirement, is one of the low-risk investments to consider.
Cons of Wholesaling
There are several disadvantages to wholesaling, and these require thorough consideration. Some of these cons include:
- Finding a Buyer Can Be Difficult
When a wholesaler acquires property under contract, the contract states a date when the wholesaler should get a buyer. Therefore, it’s a massive problem if you can’t find a buyer within the given time frame.
Also, if the wholesaler buys the property for a high price and attempts to raise the selling price to a buyer for the sake of making a profit, the buyer might have a change of heart and decide not to buy the property.
- Unpredictable Income
Since wholesaling isn’t a 9 to 5 job, you can’t expect a definite date for income. You receive payment when a deal is complete, and it could take weeks or months before you close another sale. This inconsistency of income is problematic for wholesalers.
- Wholesaling isn’t By Any Means an Effortless Job
The tediousness accompanying comparative market analysis and finding below-market value houses is often a hurdle for wholesalers, and until it becomes second nature, you’ll have major issues coping.
Conclusion
The bird dogging vs. wholesaling argument is common among new investors in real estate. It’s important to consider the pros and cons of both investment opportunities before deciding. Hopefully, you have learnt the basics of bird dogging and wholesaling as a new investor, so consider starting your real estate journey today.
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