Let’s face it. There are many people would really like to get started making some money on their own, other than working at a regular J-O-B (Definition: Just Over Broke). However, they don’t have the START-UP CASH or they can’t spend the time away from their regular J-O-B.
I believe that most of the Formulas we have been giving you allow you to try them out in your “Other Than The Office” time. If you give these Formulas a real shot you will find that they DO work - that is if you match them WITH your work. However, you must give them a “Real” try. The more you try, the more experienced and confident you will become.
Also, remember to find yourself a mentor, if you can. Check out any Real Estate Investment Groups in your area. You can look these up online. Search Google for “Real Estate Investment Groups”. You will find every state listed. Click on your state to locate the different groups (clubs, associations, etc.) I find 12 groups listed in Texas. Visiting and joining one of these groups will expose you to all kinds of expertise in Real Estate.
Anyway, let’s get back (or started) on today’s Formula, “Being A Bird Dog”. You know the function of a Bird Dog, right? He/She finds and points out the birds (quail, dove, pheasant, etc.) for the hunter. For his efforts the Bird Dog is rewarded with treats, love, and tender care.
Being a Real Estate Bird Dog is somewhat similar. You, as the Bird Dog, find good Real Estate deals and point them out to the Investor or Rehabber who eventually buys the good deal, and you get your treat – $$$ – without having to put up your own money. Let me give you a couple of examples of how it works.
We will use an example with working with Rehabbers. These are people who are looking for properties that need repair and fix-up in order to make them ready to sell. Many times you will find them vacant and in generally poor condition. The Rehabber does the “Rehab” and puts the home or other property back on the market at a substantially increased price.
These Rehabbers really need to be doing the fix-up work rather than looking for more projects. This is where you, as the Bird Dog, come in. You get to know the Rehabbers in your area. One way to find Rehabbers is to run an Ad in your local newpapers, under Real Estate – Houses For Sale. Place an ad like “Handyman Special”, or “Fixer-Upper”. This should get you some calls from Rehabbers. Another way is to ask around with Realtors in your area, or go to the contractor area at Home Depot or Lowe’s. They will be there buying materials early in the morning.
My personal experience has been in the Rehab area. Several years ago, a partner and I were buying “Distressed” properties; fixing them up and reselling them. Many of our deals were brought to us by a “Bird Dog”.
So finally, here is Example #1.
1. You locate a house which obviously needs repairs. The house is vacant and has a sign in the yard,
“For Sale By Owner”. Note: If there is no sign, you can find out who the owner is by going to the
County Public Records).
2. You do your research to determine what will the house sell for AFTER it is fixed-up? You find this by reviewing Comparable Sales in the area over the past year. How do you do this?
a. Talk to appraisers in the area who will have this information.
b. Find a Realtor who will get this info. for you from the Multiple Listing Sales (MLS).
c. Look for other houses for sale in the area which don’t need fixing-up and find out the asking price. Let’s say you find out that the AVERAGE sales price over the past year indicates this house should sell for $100,000 after being fixed-up.
3. Next – Determine what it is going to cost to fix-up the house and get it “Ready To Sell”. How do you do this?
a. Again, get to know some Rehabbers. Ask them to give you an estimate of rehab costs. Some will do this hoping to get the rehab job or maybe even to get the house for themselves; to fix it up and resell.
b. Try to develop a relationship with an Appraiser or two. Most of these people, with a little experience, are pretty knowledgeable about repair costs.
Let’s say that the high estimate to do the rehab is $15,000 (You can get a lot of rehab for $15,000)
4. Next – You have to build in a profit for the eventual buyer (The Rehabber in this case) Let’s say $15,000.
5. Your Bird Dog fee = $5,000
6. Misc. & Administration (There will always be unexpected costs – Trust me on this one). = 10% or $10,000.
7. OK – Now you offer the owner $55,000 for the property, AS IS. You can do this with a simple “Sale & Purchase Agreement”, available at many office supply stores; Office Depot, Office Max, etc. You write the contract up – With you “And/Or Assigns”, as buyer. This “And/Or Assigns” is critical. It gives you the right to assign the contract to another party. Now, I have said you would need No Cash to do this Formula. I may have lied a little. It would be a good idea to give the seller of the house a little “Earnest Money”, maybe $100, when you get the contract. It could be more or less, it could be a check, but the point is that it strengthens your contract when a consideration is given.
8. Now with a contract in hand, you go visit your Rehabbers and offer to assign them your contract for $5,000. If you find a taker, you are out of the deal with $5,000 in your pocket.
Let’s re-cap the Deal -
Eventual Sales Price of the House $100,000
Purchase Price to Seller $55,000
Rehab & Fix-Up Costs $15,000
Misc. & Administration $10,000*
TOTAL - $80,000
Gross Profit $20,000
Bird Dog Fee - $5,000
Profit To Rehabber $15,000
* If Miscellaneous costs are less, more profit for Rehabber.
Summary: Everybody WINS – That’s the major key to making deals and establishing a good reputation – Everybody WINS. Remember – If you can solve a problem, you can make $$$ – In this example you solved 3 problems:
#1 And MOST important – You solved the homeowners problem by getting his house sold.
#2 You solved the Rehabber’s problem by finding him/her a house to rehab.
#3 You partially solved you problem by generating $5,000 with little or no cash outlay.
These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.
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