Make Money With Real Estate Bird Dogging

If you do not possess money to start out your real estate investing career with, you can find choices that you can take that do not demand money but will require time. One method that we are going to go over is called the Bird Dog.

If you don’t have money to execute the deal, you can definitely find the deal for another real estate investor and get paid at the same time. The way it works, in its simple form, is that you do the leg work to find a great real estate deal, get it under contract, and then sell that contract to a real estate investor.

Before you go on, let’s give you a little formula. This formula is used to figure out how much you should offer on a house. Do not exceed the percentage of 65%. The lower you go, the better chances you have at selling your deal to another investor.

ARV x 65% – Repair Cost = Offer

$175,000 x 65% = $113,750

$113,750 – $15,000 = $98,750

So let’s start going over this. Say for instance, you are looking for houses that can be rehabbed. Now, after doing some work and researching, you find a house that you can get under contract for $98,750. You did your homework on this house, and you find that the total cost to repair the house is $15,000. After making the necessary repairs, the value of the house will be $175,000. Because you either do not have the money or you do not have the experience necessary to successfully execute this deal, you will get the property under contract, and do what is called “flip the paper”. You will be selling a contract, not a house.

Technically speaking, you can obtain a house under contract using only one dollars put into escrow. Although this isn’t usually the circumstance, some homeowners may wish for that you place more money down for deposit like $500 and up. So what you do, is you make your offer to the home owner to purchase the house for $100,000, and you offer to put $300 or more into an escrow account. Make sure, and this is important, that you put a clause inside the contract that it must be subject to inspection. This implies, that at that time of the inspection of the property, you’re able to pull away from the agreement if you’re not satisfied with the results of the inspection. If you do not have this in your contract, this means that you are liable to lose the money that you put into escrow.

So now, you’ve got the right to buy this property at $98,750. You’ll be making your money by selling this right to another investor, but you’re going to raise the price to make your money. Let’s imagine for example, you add $3000 to the final cost to the investor. The investor’s price tag to purchase the house is going to be $101,750, and the repairs cost $15,000, leaving the whole amount to purchase and rehab the property at $116,750. Right after doing the calculation, dividing the acquisition cost and repair cost by the after repair value, you’ll get the ARV percentage. In this example, that percentage equals 66.7%. A number of investors will be using hard money, and hard money lenders typically like deals to be between 65% and 70%.

Now, there are a couple of ways that you can sell this contract to another real estate investor. You can either perform what’s called a double close at the escrow office, or you can use the clause “and/or assigns” next to your name on the contract. For example, on the contract it will say “Tim and/or Assigns” will be purchasing the house. That clause means you can assign the contract to anyone. If you only had your name on the contract, you must be the one to purchase a house. In that case, you’ll have to do a double close at the escrow office.

Now let us go over the way to implement a double close. Not all escrow company are going to be able to do a double close for you. Many people in the escrow company don’t have any idea what a double close is. Say for instance, you didn’t make use of the and or/assigns clause, and you have your investor prepared to purchase a house. What we do, is have the escrow firm to write up a purchase agreement for a purchase price of $101,750 (which will include your $3000 profit). So you are seated at the table, and you have two contracts at your fingertips. The deal is going to have to work in this order: Your investor buys the property for $101,750, the escrow company obtains the cash, and next they use that money to buy the house from the original home owner for $98,750. Which means that your investor covered the home, so you in turn pocketed $3000.

Carrying out a double close is a good method whenever you don’t want the real estate investor that’s purchasing the contract from you to find out the amount you’re really earning from the deal. Although it won’t happen that frequently, some investors could be turned off and not wish to buy the contract knowing that you’re making a large amount of money from it. For example, in the event you located this same house for $88,750, and you are selling the contract for a profit of $13,000. Despite the fact that the offer can still be good for the real estate investor, some could be picky and not want to do a transaction with you. Therefore in that case, performing a double close is ideal.

So that is a basic understanding of how to be a bird dog.

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