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Jen at Millionaire Mommy Next Door posted a brilliant guest article addressing how to take advantage of the current housing slump and make money through creative house renting and leasing.

In our city, there are 16,000 foreclosures for the month of April.  Many of these desperate homeowners attempt to sell before the “Grim Reaper” Bank Forecloser comes knocking on their door.

Imagine you are currently renting an apartment and would love to upgrade to a house rental.  Maybe you need extra space, a yard to plant a garden or for your kids to roam. 

By approaching FSBO’s (For Sale By Owners) with the idea of leasing from them until they can sell, you could find a sweet deal!

I encourage you to check out the article How to Make Money Without Ownership: Take Advantage of the Housing Slump to learn more.

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I recently joined the message boards at www.wahm.com and was pleased to find a board dedicated to moms and dads in the real estate business. As I have mentioned before, Dad is a full-time investor and realtor. I rather enjoy helping him with his business and have a knack for finding properties to rehab.

A member on the site asked about “Bird-Dogging” and how one could do this for a living. Here was my reply:

Bird-dogging involves finding real-estate investors (Specifically rehabbers, house flippers) houses to purchase, and in turn, you receive a “finders fee”. Such fees can range from $500 to $1000 or more. There are many ways to find such investors, like calling numbers on “We Buy Houses” signs and joining a local Real Estate Investor club.

You mentioned that there are quite a few “fixer uppers” in your area…well you could contact those owners and arrange the referral to the investors.

The key is to get the motivated sellers before they list through a realtor (and then the house is on MLS, accessible to buy by anyone). We find houses by looking for run down houses in decent neighborhoods, and then contacting the owners to see if they want to sell. Many times an owner is in a bad place financially and cannot afford to repair his/her home and selling (to the investor you are bird-dogging for) is an answer to prayers. They save money by selling “by owner” and not paying a realty firm commission.

Do real estate investors use bird-dog services? You betcha! My husband gets so busy at times that we would gladly pay a bird-dog fee for a decent rehabber that would be profitable for us to buy, fix-up and sell.

It’s important to treat bird-dogging as a business, not just your “real estate hobby”.

Building a successful bird-dogging business takes time, perseverance, and a willingness to learn. Investors will take you seriously if you are professional in both communication and appearance. Consistently looking for deals and building your network of investors can pay off.

This is a nice part-time business and who knows, a great deal could come along and jumpstart the purchase of your own real estate investment!

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I am extremely pleased to report that we closed today on our latest rehab house. Unfortunately, this one sat on the market for nine months. We lowered the price (several times), offered realtor incentives, offered buyer incentives, kept the place immaculate, etc, etc.Anything we had control over, we did. What we could not control, were the five other houses for sale on the same street. This is the way our market is right now.

Even though it sat on the market much longer than we intended, we still walked away with profit. Here are 5 things that helped us through this experience:

• Reserves

We had enough financial reserves set aside to cover holding costs (mortgage payment, insurance, taxes, utilities, etc.)  As part of our business strategy, we calculate these costs (and how much to set aside) prior to ever making an offer.  It works, because we have not lost money on a deal yet. 

• Ask for Feedback and be Willing to Change

After every showing, we followed up with potential buyers and realtors who showed the house.  We asked for feedback and learned what they liked and did not like, and then made changes where appropriate.  This helps to “take the pulse” on a particular market as well. 

• Drop the Price

When we first listed last year, the house was well within the average asking price in that neighborhood and was in great condition. Due to the slow market, we had to drop the price be in line with other comparable houses. I personally dislike doing this…I mean who wants to lower their potential profit? However, it was necessary to sell.  

• Keep Positive

After the first 90 days passed and we had no real offers to work with, the house started to feel like a burden. We took that energy, funneled it into constructive activities like advertising and networking, and reminded ourselves that the house would eventually sell.  

• Have a Plan B!

It is vital to have alternative plans when rehabbing/house flipping. In our case, we set a drop-dead date of when we would convert the house to a rental if needed. Thankfully, it sold before that date.

On a side note, I had the opportunity to talk with the buyer’s children at closing, and they told me this was their first home. I loved seeing the look of excitement on their faces when I asked if they picked out bedrooms…and listening to them enthusiastically describe the plans they had for “their rooms”.

This is a wonderful benefit of this business, taking a junk house and turning into a home anyone would be proud to live in!

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