ForeclosuresMass - ForeclosuresMass Monthly - Feature Article - Talk Like a Contractor to Explode Your Rehabbing Profits (June 2007)

I've spent a lot of time studying the art of rehabbing homes from some of the best in the business. And, I've learned quite a bit from my own experience of doing over 100 deals and 64 projects in the last year alone.

I've come to realize that while investors understand the business potential of rehabbing properties, many of them have one fear that keeps them from getting into the real estate business.

What is their fear? They dread having to deal with the headaches and potential nightmares of working with contractors.

When people see me and my team on A& E's TV Show, "Flip This House," they see the rapport I have with my contracting teams - rapport being the critical ingredient to rehabbing homes and maximizing profits.

* Next 37 17 investors only!

One of the most common questions that viewers post to my blog at www.thanandpaul.com is this: How do you find these qualified and competent contractors to complete your jobs both professionally and proficiently?

The first step in good contractor management is hiring the right contractors from day one. The key to doing this is knowing what to look for in the first place and then communicating your expectations effectively to potential contractors.

I cannot stress enough how important mastering communication regarding the initial estimate is on the final outcome of your job. It's why I developed a three-step process to help you become an expert communicator in Contracting 101.

When I got started in this business I would call four contractors and receive one bid. Investors tell me they're lucky if they get that - and often times, it's a bogus quote.

The solution to this is you must master the initial conversation with the contractor by making it clear that you know what you're talking about.

If you're unsure of costs or the job itself, you must do preliminary research so that you can speak a contractor's language.

Begin by educating yourself on what it costs to do a job. You can search online, talk with local material suppliers, or consult a reference manual similar to the one I created to solve this problem when I was training my project mangers.

I've found specific manuals dictating baseline costs of materials and labor are one of the most valuable resources to use especially if you're new to this business.

Before I meet with a contractor, I lay out what I call a "detailed scope of work." The scope of work includes each component of the contractor's job that I expect to be completed, within a certain timeframe, in order for the contractor to be compensated. In addition, I make it clear that I have a budget.

The scope of work shows that I've done my due diligence, and that I know what I am talking about in terms of the work expected.

Let me give you an example of a typical conversation that I would have on an initial estimate:

Notice that I laid the foundation for what I expect from this contractor before meeting him. By following Contracting Interview scripts like the one above, I've obtained the answers I need before a contractor has come to look at the property and bid on the job.

When a contractor's estimate is close to my numbers, my next step is to investigate the contractor's business.

I want to know how long he's been in business. Because of previous negative experiences, I no longer hire contractors who have less than three years experience.

If the contractor has another business, I investigate it, as well as the time and capital it takes to run it. I want to make sure that the contractor can work within my allotted timeframe. I also check the contractor's business credit.

Once the contractor passes muster, I give him or her six critical documents which I've personally developed that help protect my business. These documents give me an opportunity to communicate both verbally and in writing exactly what the job entails. I also go over the payment schedule, which outlines benchmarks and milestones.

By following these three steps you'll build a network of competent contractors who can efficiently manage and complete multiple projects - which in turn leads to huge profits in the future.

Paul Esajian is the founder of CT Homes, LLC, a multi-million dollar real estate investment company based in New Haven, CT. You can contact Paul through his blog at www.thanandpaul.com.To learn more about Paul's Rehabbers Toolbox home study course that contains all the templates mentioned above please visit www.fortunebuilders.com.