Although I am not a hunter, I know that some hunters use bird dogs. Through their keen senses and training, these dogs find, flush-out, and retrieve the birds that their owner’s covet.
Believe it or not, commercial multifamily real estate investors can use “bird dogs” too. No, not English Setters, Pointers, or Retrievers, but well-connected individuals who sniff out deals and forward them on to investors for a fee.
Just like with hunting, the bird dog does not take down the prize – that is up to you the investor. In essence, bird dogs are deal finders.
Being a bird dog is one of a couple ways that individuals can profit from commercial multifamily real estate without actually owning any properties.
Wholesaling is the other way. Wholesalers require the same skills as bird dogs, but they take it one step further. Not only do wholesalers find deals, but they negotiate those deals with the seller.
Once the wholesaler has negotiated the deal, they will put it under contract so that they have control of the property. Wholesalers have no intention of closing on the property, so they put contingencies in the contract that allow them to drop out of the contract for various reasons without any penalty to themselves.
Another clause they put into their contracts is the ability to assign the contract and property to another buyer. This clause is critical as that is how a wholesaler makes his or her money. They find the deal, negotiate the sale, put the property under contract, and then sell or assign the property to another buyer at a higher price.
The difference between the price they negotiated and the price they sell or assign at is their profit. Should they be unable to find another buyer, they simply back out of the contract utilizing one of the contingency clauses they put in place.
While I have never acted as a wholesaler, I have been a bird dog on more than one occasion for various investors. As an active investor looking for your own properties, you will run across deals that do not meet your investment criteria for one reason or another. Perhaps the sizing is not right (too big or too small), the age is not right (too old or too new), or there is some other reason that keeps you from buying that property yourself. There are still ways that you can make money on those deals without having to own them.
P.S. Being a bird dog and or a wholesaler are ways in which you can profit from commercial multifamily real estate without having to take ownership of a property. My next blog post will discuss the two ways in which you can actively own commercial multifamily real estate.
Want to learn more?
Download your free copy of Evidence Based Investing and learn why it’s a preferred asset class.