Real estate has improved considerably from its darkest period of 2008/09 and likewise so has the work contractors find. When the housing bubble burst, contractors in general likely found themselves in a survival mode as was the case for me personally. I frankly had to lower pricing and accept work from a bigger geographical area in order to stay busy. This posed several new challenges that not only added costs but in the end burned out good crews fed up with foreclosure grade work.

The only way I can sustain a competitive business that is insured, bonded and licensed with foreclosure/investor grade work is volume. In my experience, pricing in this area is generally 15-30% lower across the board than say new construction, insurance work or home owner improvements thus in order to actually run a company in the black I would have to complete 3 foreclosure/investor renovations in order to see a sustainable profit margin. That said, the volume has dropped off considerably from its peak in my market 2 years ago while other sectors of construction have picked up for us which essentially allows us to be much more selective in what work we accept. Some may not like what I am saying but it is the truth in my world. Good tradesmen prefer and get good work so finding ways to make your project alluring isn't a bad thing.

My suggestions for what it is worth to all investors and bank owned property owners seeking qualified contractors?

1. Factor in higher renovation budgets due to rising material & labor costs. What worked last year doesn't necessarily work now. Believe it or not, you are in competition as well against more lucrative work out there. Here is a link to a site that tracks such costs - http://enr.construction.com/economics/

2. Understand and include building permits and associated costs. Many building departments require architectural drawings, insurance bonds, licensed trades and inspection fees. If you want to vet your contractors, insure against faulty work and actually increase the value of your flip, then the permit process should be welcomed.

3. Establish a finish standard for your project. Know what you want before seeking a contractor. Attempting to do this on the fly only creates frustration and delays cost everyone profit. The less organized you are at the beginning of the process, the less likely you will maximize your profit at its end.

4. Be prepared to make timely payments. Despite popular opinion, contractors are smart and most understand the lien process very well. Personally, I take dated and time stamped photos of our work, require signed contracts and change orders for work to be performed and text or email any important information relevant to the projects completion all in an effort to document just in case. For as many contractors accused on this site of being unscrupulous equally I can tell you that can be a two way street. Trust is a word I leave out of my vocabulary when bidding or accepting a job. Make sure everything is in black and white to avoid becoming grey very fast.

5. Have a realistic deadline that all can adhere to. A good rule of thumb is 2 weeks for the first $10,000 and and additional day for every $1000 above that number on most renovation projects. This does not include inspections nor the typical 2-4 week delay in obtaining permits.

6. If material is supplied, make certain it is all secured and on site when needed. I would get into a habit of performing an inventory review on a weekly basis to make sure nothing walks off the job site. I think it is also wise to do this with the contractor and make him or her sign off each week.

7. Lastly, make sure you own the house before obtaining free bids or risk being ignored. Personally I charge $500.00 for a renovation bid as an investor pre-purchase tool which frankly is cheap considering the typical bid requires 3 hours or more of drive time and on site project inspections then another 2-3 hours of typing out a comprehensive bid that considers all desirable finishes. No different than an office visit you pay for at a doctors office, our expertise and education in the trades is a value to most sensible investors.

If basic principles are applied during pre-construction, 9 times out of 10 everyone will walk away feeling good and most importantly with profits earned. I love when people tell me "It's not rocket science", I beg to differ. There are probably just as many things that can go wrong in a renovation and comparably speaking as much financial risk when they do.