How to Speak the Secret Language of Contractors

Often times people ask me how I have been able to manage between 15-25 projects at one time and not lose all my hair. Although I must admit that I have lost quite a bit of hair from the many mistakes I have made along the way, I have noticed recently that it is slowly growing back as I get better at learning how to manage my contractors more effectively and avoid these mistakes. I have spent a lot of time studying the art of rehabbing homes from some of the best in the business combined with learning from my experiences of doing over 100 deals and 64 projects just last year alone.

Now I have made it my mission to share my systems for hiring contractors and managing projects effectively with real estate investors across the country. I noticed that many investors see the huge potential of the business of rehabbing homes but dread having to deal with headaches or potential contracting nightmares. This fear prevents many investors from getting started rehabbing in the first place. I am committed to helping you overcome this fear so you can cash in is one of the most lucrative streams of income out there.

So what does it take to find these contractors?

When people see my team and I on TV Show Flip This House they are able to see the amount of rapport that I maintain with my contracting teams which is a critical ingredient to becoming successful in the art of rehabbing homes to maximize profits. Let me say this, there is a lot of work behind selecting and managing a contracting team that can get your job done not only the efficient way but the most effective way which will ultimately mean the difference between success and failure on your bottom line.

One of the most common questions that viewers post to my blog is this: How do you find qualified and competent contractors to complete your jobs both professionally and proficiently? The first step in good management is hiring the right contractors from day one. The key to doing this is knowing what to look for in the first place. The single most effective way to communicate to potential contractors is to learn to speak their language. The single mistake of mismanaging your contractors can make you or break you in this business. Although it may sound cliche I cannot stress enough how pivotal mastering communication on the initial estimate can be on the final outcome of your job. I have a 3 Step process that I follow that will help you become an expert communicator in Contracting 101.

Step Number 1

Do your Homework

When I got started in this business I would call four contractors and receive one bid. Many of you I am sure are lucky sometimes if you can get that and when you do it is often a bogus quote. The solution to this is first mastering the conversation with the contractor while they are bidding on the job by making it clear that you know what you are talking about. If you are unsure of costs you must do some preliminary research beforehand so that you can speak contractor language. Contractors will not respect you and often take advantage of you if do not clearly state what you need and what you expect to pay for their services.

Begin by educating yourself on what the costs of doing a job really is. You can search online, talk with local material suppliers or consult a reference manual similar to the one that I wrote which I created to solve this problem when I was training my project mangers. I have found specific manuals dictating baseline costs of materials and labor are one of the most valuable resources to use especially if you are new to this business.

Step Number 2

Lay Out a Detailed Scope of Work that Outlines Your Expectations.

Before I meet with a contractor I lay out what I call a detailed scope of work. This scope of work lays out each component of the contractor’s job that I expect to be completed within a certain time frame in order for them to be compensated.

This holds them accountable but also shows them that I have done my due diligence and that I know what I am talking about in terms of the work expected. In addition in my initial meeting I make it clear that I have a budget and a specified timeframe to complete the work within. Then I will actually give them a deadline to meet when submitting their quote. I clearly state a period of time that I expect the job to be done in order to test their confidence in hitting the overall target date for completion.

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

Hi, I’m Paul Esajian with DR Homes, LLC. I work with a network of investors that rehab over a 100 houses a year and I need to form new relationships with responsible contractors so that I can give them multiple projects. Is this something your interested in?

Great, I have a budget of 25k and feel confident that you can work within that number. This is a great opportunity for us to start working together and I would like you to give me a estimate for a roof at 123 East Street today if possible. The scope of work is at the house with the standard Quote Itemization Form complete the form and fax or drop off this quote by 5pm today. I need to get working on it right away as it needs to be completed in three weeks. Do you have the staff and the time to complete this job within that time frame?

Great, as I mentioned before I do multiple projects at once so I will require you to pull the permits, That is something that you do correct? Great, I have written up a scope of work that I expect you will need to do to complete the job but will also be open to your expert opinion in how I can get this job completed in the fastest most professional and cost effective manner.

Great, I look forward to reviewing your bid on Wednesday and if everything looks good we can begin work on Monday.

Notice that I laid the foundation for everything that I expect from this contractor before I have even met him. I do not want to waste his valuable time and I definitely do not want to waste mine. By following contracting Interview scripts like the one above, I have obtained all the answers I needed before he has come to look at the property and bid on the job. If they can meet all these requirements next I will invite them to come bid on the project.

Step Number 3

Investigate the Contractor’s Business before you go to contract.

When an estimate comes in and is near my numbers the next step in my hiring process is investigating the contractors business. I want to know how long they have been in business. If they have another business I also investigate what that is and the time and capital to run that as well to make sure they can work on my allotted timeframe. Because of previous negative experiences I no longer hire contractors that have less than 3 years experience as a rule of thumb. Next I check their business credit. I never want to have to make a payment because they have run out of funds. I go by the golden rule to stay ahead on work and behind on payments. Finally I verify their insurance and provide them with 6 critical documents that I have developed that protect my business. This gives me an opportunity to communicate both verbally and written exactly what is expected to be completed before payment can be given. I also make a payment schedule that outlines benchmark & milestones.

By following these 3 easy steps you are well on your way to building a network of competent contractors that can efficiently manage and complete multiple projects leading to huge profits in the future.

Sellers and Buyers: Working Together during a Recession

During a real estate recession, both sellers and buyers are looking for something special out of a transaction. Even though this is always the case, a recession brings out a new side of sellers and buyers; a side that is not seen very often due to the differing circumstances. No matter what side of the deal you are standing on, you need to know what to expect from the other side, as well as what you can do to help out your own situation.

As a seller during a recession you know that you are up against the odds. The reasons for this are simple. First off, the market is slow which means that there will not be nearly as many buyers looking for homes. To go along with this, the buyers that are in the market are expecting to save a lot of money. After all, recessions in the past have shown savings for buyers of up to five percent. And of course, every potential buyer will think that this is the kind of deal that they are going to get.

As for the buyers, they may not have as many homes to choose from because of the slowdown of the market. One area that a buyer may want to check is new home construction. During a recession, developers are more so inclined to drop the price on their new construction homes. After all, offering price drops and upgrades is the only way for them to get rid of the properties that they have built.

When it comes down to it, a real estate transaction can only be successful if sellers and buyers are willing to work together. During a recession this is even more so the case because both sides are up against difficult odds. When you get sellers and buyers who are willing to work together, the end result is a house that gets sold at a mutually agreed upon price. Even though this may sound a bit far fetched, it is possible to agree to terms with the other party.

Overall, it can be difficult for sellers and buyers to get on the same page during a recession. No matter if you are in the market or trying to find a buyer, you need to know your role. And from there, take the time to consider what the other party is going through. This will help you to make a deal in the end.

What to expect when Selling during a Recession

When selling real estate during a recession there are some things that you should expect. Even if these details do not present themselves to you, expecting them will put you in a much better position. Selling during a recession is not the same as doing so when the market is in good shape. The more that you know about this type of selling the better chance there is that you will achieve the success you are after.

One thing to expect when selling during a recession is a slow market. In other words, do not expect to have thousands of potential buyers breaking down the front door. During a recession things tend to slow down quite a bit. People will be more selective about what they are buying, while also moving forward in a cautious manner. Additionally, some buyers will simply decide to wait for the recession to past.

Another situation to expect when selling during a recession is buyers who are not willing to pay your asking price. They know that a real estate recession usually results in lowered prices, and for this reason they use it when shopping. The good thing is that as the seller you are in charge of the entire situation. If you feel that lowering your price will not affect you too much, you should go ahead and do so. But remember, never make a rash decision. Some sellers drop their price right away just to make a sale, and find out in the end that they did not have to do this. Consider every move that you make if you decide that you are going to sell your home during a recession.

Overall, there is a lot that goes into selling during a recession. You not only need to know about your home, but staying up to date on market news is also very important. On top of all this, you then have to deal with potential buyers. Do yourself a favor and stay patient no matter when you are selling your home. This will help you to get the best deal, and will definitely work in your favor during a recession. And as a seller, you want to have as many benefits on your side as possible.