Both get paid great real estate investment fees, but find out which method requires more work but also pays way more money!
Creative real estate investing can be divided into two categories; ‘bird dogging’ and wholesaling. As a new investor it can be hard to differentiate between the two, especially considering there are some veteran investors that do not know the differences and roles of each. The basic difference between the two is that one is lead sourcing and the other is the process of crafting investment deals.
Understanding the difference between ‘bird-dogging’ and wholesaling begins here.
This is an investing term that refers to an individual who works at trying to locate properties with high investment potential. When seeking investment properties, they are mostly looking at ones that are distressed and are being sold at a discounted price because of their need for repairs or remodelling.
These properties can be sold for a large profit after the repairs and remodeling are complete. Lead sourcing for rehabs, rent-to-owns and other profitable options is the basics of ‘bird-dogging’. After finding these profitable deals/properties, ‘bird-doggers’ present their findings to investors and collect a finder’s fee.
The rewards of ‘bird-dogging’ include:
- Earning a side income while obtaining a property investment education
- Growing your network of income property investment buyers
- Learning to make an income house flipping with little to no risk financially, or legally
- A great way to get into the real estate investing business part time
A ‘bird-dog’ builds and grows their relationships with real estate investors. In growing these relationships, a ‘bird-dog’ becomes familiar with specific property types to buy over and over. By getting to know which properties are in demand it sets the ‘bird-dog’ up for successful transactions over and over and for their referral fees to continue rolling in.
Firstly, let’s state that wholesaling is a common and successful business strategy that can be used in almost any industry – and you can wholesale more than just real estate. In a wholesale transaction you aren’t selling property – you are selling a contract. A wholesaler contacts a property owner, markets the property to potential buyers and assigns the contract to purchase to the buyer.
Your role as a real estate wholesaler is to get a property under contract and then sell the contract to another buyer.
Let’s show this in practical terms:
Jane Smith – Property Owner
Wholesaler – You
John Doe – Buyer
- Wholesaler makes an offer and then legally binding contract with Jane Smith for her property.
- Wholesaler then presents this deal to John Doe, charges John Doe a Wholesaling fee for putting the deal and contract together.
- John Doe purchases Jane Smith’s Property.
Jane Smith and Wholesaler have a Sales agreement
Wholesaler and John Doe have a Wholesale deal
John Doe and Jane Smith have a purchase transaction
The rewards of wholesaling include:
- A potential income of thousands of extra dollars per month. When a wholesaler finds an investor, they typically sell the property to them for more money than the seller is charging. The difference in price is the wholesalers profit – plus the wholesaling fee
- No credit checks are required since wholesalers do not need to borrow any money.
- Educating yourself to become a wholesaler can come from meeting with experienced investors and reading books
- Learning about the real estate market in your area
- Growing your professional network
Wholesaling is a bit more complex and requires you become more dedicated in your dealings with the sellers of the properties. Your involvement in the transactions requires you to locate properties, contact the owners, negotiate and contract the deal for an assignment fee (profit).
While both wholesaling and ‘bird-dogging’ are great options, wholesaling does have one advantage over ‘bird-dogging’ in that you get paid at the time of the assignment which is before a deal even closes!
So, if you’re looking to dabble in real estate lead sourcing for a little bit of extra pocket money, then bird dogging for a finder’s fee is for you! If you want to make serious money and great connections for your new real estate investing career – then wholesaling is what you’ll want to do.
Wholesaling will require some education and training – it’s best to have mentor to show you the ropes. An experienced investor will be able to coach towards facilitating the right deals for the biggest profits!