Avoid Costly Mistakes: 7 Tenant Selection Tips Every Investor Needs

John Harcar (00:02.374)
Okay. Hey guys, welcome back to our show. I’m your host, John Harcar, and I’m here today with Joel Miller. And besides talking about Joel’s experience and, and, you know, time in relation, I mean, in real estate and in business, what we’re going to talk about, which I think is really cool is how to deal with less drama with your contractors. We all have it. Let’s find out how to deal with it less. Remember guys, that investor fuel, we help real estate investors, service providers.

I mean, really all real estate entrepreneurs, two to five X their business. You know, we, do that by providing the tools and resources to grow that business they want, which helps them live the life they want to live. so Joel, man, welcome to our show.

Joel Miller (00:42.385)
Thanks John, I’ve been looking forward to this. It’s gonna be good.

John Harcar (00:45.56)
Awesome, and I’m excited to hear about less drama. We all want it. Let’s find out how to get it. But before we talk about all that, why don’t you kind of fill our audience in a little bit about your background, how you got into real estate and what brought you to today?

Joel Miller (00:56.878)
Okay. All right. Well, I’ll try to give you a real abbreviated version. I usually start out just by telling people that two things happened to me in junior high school that were, that set me on my path of the two main things that I’ve done in life. Number one, an investor built four four unit apartment buildings on the edge of our subdivision right on my paper. Of course I got all those tenets as customers on my paper, you know, and I, know, we all lived in,

John Harcar (01:21.763)
Be right, right?

Joel Miller (01:26.734)
single-family homes with our parents, our parents owned the houses. So this whole rental thing at the edge of our subdivision was a little different. I just have a distinct memory in about eighth grade of kind of doing the math on how rental property works as best as I could understand sort of rudimentary thing. And I kind of stuck that in the back pocket and I said, you know, I want to do that someday. The other thing was that an older kid in the neighborhood built a pirate radio station in his basement.

with the antenna on the flagpole in the backyard. Pirate means unlicensed, illegal FM station. And I had to hang out there. And that’s when I decided I wanted to be a disc jockey. So I actually got into radio in high school and in college. I studied accounting. My degree is a four-year degree in accounting because I figured, you you can use accounting no matter what business you go into. And…

John Harcar (01:59.208)
Right?

Joel Miller (02:18.486)
I got hired halfway through college at the big radio station back in my hometown. So I came home and finished up at one of the local colleges. And, and just before I graduated from college, I went from being the weekend part-time guy to the full-time guy. And that meant that I could take the calls from the basically schools that would want the disc jockeys to come out and do record hops, sock hops, whatever you want to call it in the gym at the school. And that changed my life made $75 and

John Harcar (02:42.962)
Mm-hmm.

Joel Miller (02:47.508)
Within a year I left radio because I found out I could make more in one night than I was making all week at the radio station. So I pioneered the mobile DJ business in this part of the country. And for listeners, I’m in Northwestern Pennsylvania, Erie, Pennsylvania, right along Lake Erie, about halfway between Cleveland and Buffalo. So I also worked in New York and Ohio. I did 5,051 appearances in a little over 35 years, retired from that in 2011. But I managed to buy my first rental property.

John Harcar (02:55.132)
Right.

John Harcar (03:12.082)
Wow.

Joel Miller (03:17.038)
only a few months after I did my first mobile DJ appearance. And eventually I had started a little accounting practice after college and wasn’t long till I sold that and concentrated on the DJ work and growing my rental property. And then about 1991, started flipping houses, I flipped over a hundred houses or so. And in 2018 became the coolest thing that I’ve done in this whole journey.

which is I’ve become a hard money lender to the other investors in our area here. It just gives me a big thrill to be a part of the equation for the other investors’ journeys with flipping or buy and hold properties. And then as some listeners may know, last fall my book came out that took me four years to write, starting in COVID, and when we all had nothing to do, started making notes and…

That came out last year. called Build Real Estate Wealth. Enjoy the Journey in Rental Property Investment. And it’s an all-encompassing book on being involved with the rental properties. It’s for advanced investors that are looking for some sort of game-changing information to supercharge what they’ve got. But it is also for beginners and

people who don’t even think real estate is for them. And it takes you all the way from mindset through entity formation and then all the usual stuff like property acquisition and managing property and all that. And then winds up with some philosophical things like discussing the difference between riches and wealth and other best practices things that you can use in not only rental property, but any, your life or any business that you’re in. I will tell you, Ron LeGrand got a copy of the book.

John Harcar (05:02.651)
Right.

Joel Miller (05:05.324)
reviewed it and his review was he wrote this he said I wish I would have had his book when I was getting started.

John Harcar (05:12.658)
That is a very good compliment from a very smart gentleman.

Joel Miller (05:16.63)
Yes. So, well thank you. It’s doing really well. It has become a bestseller and it’s available on Amazon and about 15 other platforms. You can easily find it by looking for my name or the title of the

John Harcar (05:18.386)
Congratulations.

John Harcar (05:30.92)
That’s so awesome. if you’ve watched any of my podcasts, I do like take a part and go backwards. I always love the journey. think there’s a lot to learn in a journey. So you as a kid were acclimated through some rentals being built near to you.

Joel Miller (05:45.932)
Yeah. Yeah. There weren’t any others around in the neighborhood. And so it was sort of new, you know, like, hey, those people live there, but they don’t own that. And they pay to be there and they pay more than what this guy paid to build this thing. And it’s very rudimentary. But I said, that’s cool because you own it and it still produces income whether you go to work that day or

John Harcar (05:53.041)
Right.

John Harcar (06:08.73)
Right, so that’s planted that seed to make you buy that first one you were DJing.

Joel Miller (06:11.726)
Mm-hmm.

Yeah, yeah, that’s right. It’s, it became apparent that the way to grow wealth is through owning things that produce income and wealth. And we call real estate an ideal investment. You know, you’ve got I for income, D for depreciation, which is related to savings on taxes. E for equity growth as the mortgage gets paid down by the money that comes in from the tenants and

A for appreciation for how it just grows in value typically over time and L for leverage. We all understand that this whole business runs on OPM, other people’s money, which is leverage.

John Harcar (06:58.44)
So as you started to become more of a landlord, buy more properties, what were some of the struggles? What were some of the things that you personally were running into as you developed and grew in the journey?

Joel Miller (07:10.466)
Well, I will tell you that the thing that I had to learn the most and then I believe that everybody has to have a very high skill level is tenant selection. Because you might be good at any of the other aspects. You might be good at finding property, financing property, fixing property, selling property or any of the things that are involved with rentals, maintaining the buildings.

But if you are not good at selecting the people that are going to live in there using your valuable property, which might be worth tens of thousands, hundreds, millions of dollars for an extended period of time without your direct supervision and expect them to pay you and take care of the property, you really need to learn to select your tenants. And tenant selection begins whenever you start to think about the possibility of maybe perhaps buying some property.

Because every decision you make after that, as far as location, the type of property, the condition of the property, and how you prepare it, how you advertise it, every decision that you make slowly narrows the universe of people who are likely going to respond to an ad and ultimately move in. So tenant screening is, in my opinion, a latter part of tenant selection.

John Harcar (08:08.264)
Mm-hmm.

Joel Miller (08:38.214)
You have to not only be good at what you do to prepare apartments, select departments and so on before you even interface with a live applicant, but you also have to be good at your interaction with these people after you come face to face with them or phone to phone with them before you even agree to show an apartment to them. And weed them out. I mean, your objective is to have as few showings as possible.

and get the people there that are most likely to want to rent the apartment after they’ve seen it. So that would be my answer to question as my struggle. I could do all those other things. I had to learn the tenant selection part of it through a lot of experiences, shall we say.

John Harcar (09:26.898)
Okay, yeah, so I was gonna ask, mean, did you learn, did you seek out someone to teach you how to do that? Did you seek out education or was it trial by error?

Joel Miller (09:32.482)
I mean, you know, when I started and I am in my 48th year as a landlord, bought my first property in January of 78. And back then I was reading hardcover books by guys like Al Lowry and Bill Nickerson. Nickerson was Ron LeGrand’s mentor, you know, and eventually moved into all the late night TV half hour infomercial gurus that were selling their tape courses with the little manuals, you know, you get like

eight or twelve cassette tapes and you’d follow along in the manual while you played them. I, you know, I did that and took notes. I still have my notebook. It’s like three inches thick on all the notes that I took on all those tape courses I had. At the time there wasn’t what we have now with all the internet, easily access information and everybody having videos that you can just watch and

And our own organization, Local, which is a very strong professional organization for landlords, was started in 78, only a couple years before I joined them, about 80, 81. And as we grew, we became an educational organization to our members. I teach the Landlord 101 class, as we call it, in addition to a 201 class. And we’re just constantly teaching people how to be better landlords.

Thank you.

John Harcar (10:55.816)
That’s awesome. But I especially loved what you said about knowing who your person, your renter is going to be, Kind of doing that whole reverse engineering it. Like if I want to market to, if I want my renter to be midterm nurses, I need to have a property near a hospital. need to have the, so I love how you approach that. What do you think are, you know, some of the, some of the, before we talk about, you know, how to deal with a landlord,

Joel Miller (11:03.715)
Yeah.

Joel Miller (11:12.363)
Mm-hmm.

John Harcar (11:25.797)
What do you think are some of the trends or things that are going on right now in the industry that you feel that people need to know or look out for or think of?

Joel Miller (11:35.118)
Well, I’m not an economist, but I just kind of get the feeling that things are settling into a little bit of more normalcy. I mean, this prime at three and a quarter like we had for five years up until, I don’t know, a year two ago, that’s not normal, everybody. And you all got mortgages five years ago at a lower rate that they’re going to get adjusted into a higher amount. And I hope you’re ready for the change in your cashflow. You know, that’s what I hear about is that…

these mortgages that have the five-year interest reset that are coming up for evaluation in the near future are going to put a number of properties into unviable situations. And so that would be probably the biggest alert that I would say. When I started, Jimmy Carter was president. He was struggling with inflation. Prime was 22%. Can you believe that?

22 % the month I bought my first house. And I was a tenant for the first five and a half years in somebody’s apartment complex while I started buying rental properties. When I bought my first personal residence in 1983, I was thrilled to get 12 and a half percent interest. Yeah.

John Harcar (12:51.494)
Yeah, I’m sure. I’m sure. So let’s touch a little bit on, and I know you mentioned before we got on that this is kind of part of your book. So let’s touch on how to have less drama with your contract.

Joel Miller (13:05.644)
Okay. I have to tell you that this came out of a talk I just happened to mention to you that I did just last week at the Mr. Landlord National Convention. They had a theme about more income and less drama and they asked me to do this to fit into the less drama part because we all know one of the biggest sources of drama other than tenants, if you’re in a rental property business, is dealing with contractors. And so I guess we’ve got to give the real abbreviated version here.

So I’ll put on my glasses and see what I can do. I’m going to preach from the book of Joel here as I call it. It’s my best reference to whatever subject I’m going to talk about. I guess the first thing I would tell you is that there’s kind of three points for lowering the drama. Number one is start building your contractor list early. Now that’s for two different people.

John Harcar (13:38.119)
Alright.

John Harcar (13:42.984)
Ha

Joel Miller (14:04.392)
That’s obvious for somebody who’s just starting out. Build a contractor list when you’ve never had a contractor list. But for the people that are more experienced, as you go through your time as an operator of rental property or a house flipper or whatever, you’re not going to have the same contractors at the beginning that you, at the end that you had at the beginning. So when I say start your contractor list early, that means don’t wait until the people

the contractors you’re used to using crash and burn for some reason before you start looking for who you’re going to have replace them. Always be adding to your list. However that comes about, whether you saw a truck, a work truck with a phone number on it sitting next to you at the red light, or you talked to the people at the supply desk at the big box stores, or whether you saw their advertising. However, if it looks good to you, put it in your list.

even though you don’t have a current need for a contractor because that’s a pinch point. That’s a point of drama is when you find out that you can’t use the guy you want to use, you’ve been using and you need the work done. Okay. Second thing is have more than one contractor in your, your, your purview for each different trade or type of work that you need done kind of ties in with the last thing where you, um,

John Harcar (15:03.515)
Mm-hmm.

Joel Miller (15:32.428)
You know, got to be working on your list all the time, but you might be working with two or three favorites and they’re all good. You know, it’s just a matter of which one’s available at the time you need to work on. Don’t get stuck that your guy that you like, you got a great relationship with, isn’t available and he’s the only one you got. So now you’ve created drama for yourself because you’re going to have to wait until your favorite guy is available.

John Harcar (15:57.308)
Hmm.

Joel Miller (16:01.67)
Or you’re back to the first thing where you’re trying to find an additional contractor for that area of work and you haven’t got anybody on your backup list. And then the third thing is that you want to, communication, like in any kind of relationship. You you have to set expectations with the people you’re going to work with so that it’s not a case where something goes a little sideways and you,

John Harcar (16:10.214)
there.

Joel Miller (16:31.214)
you had never talked about that. And now all of sudden it’s a big issue. It’s drama. And it could be anything. And now I will add that some of the first communication you need before we even let them work for you is the stuff like their certificate of contractor’s liability insurance, their tax information. I mean, you don’t want to be realizing you paid somebody more than $600 in January.

when you’re doing your 1099s and you haven’t worked with this guy since March and you’re trying and now he’s maybe not even around or whatever you can’t call and and and you’re trying to get a hold of somebody to get their tax information so you can send them a 1099. Not good practice. Same with insurance. You don’t want to have a situation where there’s an insurance claim obviously and you have no idea who this guy’s carrier is. You need that and the tax information and all their proper contact information, email address.

John Harcar (17:03.144)
Mm.

John Harcar (17:14.536)
Thank

Joel Miller (17:27.65)
phone number, alternate phone numbers, mailing address, home address, if it’s different from the mailing address, all that sort of stuff. then I find too that your contractors fall into two groups. The ones you use regularly, like for example, a real handyman, just like small repairs, and a sewer drain opener person, company, that’s an example of something you might use, a trash hauler.

might that might be routine stuff. But then there’s other more specialized things that you might only use once a year, every couple years, whatever you’re on a project, and it just calls for a flat roof all of a sudden, you know, every month, you know, or masonry work of some specialty of something, you know, something like that. So that’s just a brief explanation, you’ve got your two groups of contractors. So the things that I’ll just briefly say what

John Harcar (18:03.4)
Mm-hmm.

John Harcar (18:07.877)
Yeah, right, right.

Joel Miller (18:26.028)
you would want to discuss ahead of time so that they don’t surprise you is the quality of work that you expect. And you think right away, well, I want to make sure this guy is going to be good enough. But it works the other way, too. I was talking with a landlord at the convention that he had trouble with a contractor who just kept giving him better work at a higher price than what he needed for his repair, for the particular property that they were working on. It didn’t need to be that good.

John Harcar (18:53.457)
Mm-hmm.

Joel Miller (18:55.276)
You know, he didn’t need to pay that much. you know, quality work, how you will be charged, how and when the contractor will invoice you, what if any partial payments must be made, you know, discuss your draw schedule, how long you have to pay an invoice once you receive it. In other words, does the guy expect to stop at your office on the way home from the job and get back? Or, you know, is he going to go to his office and send you an email and you’ve got 30 days to pay it?

John Harcar (19:23.323)
Yeah.

Joel Miller (19:23.854)
That’s everybody’s got to be on the same page, you know, with not only that, but when the work is to begin, when it’s to end, the consequences if those things don’t happen, how you want your contractor to interact with your tenant. Do you want the contractor making the appointment with the tenant to go do the work or do you have to do that? What the contractor can discuss with the tenant. I mean, I don’t want the tenant discussing his relationship or her relationship with me.

John Harcar (19:26.322)
Sure.

John Harcar (19:53.789)
Yeah.

Joel Miller (19:54.026)
any more than I want the tenant discussing their relationship with me between the two of them. You see, I don’t want the contractor going in there and saying, my gosh, you got a dog, man, you are in big trouble, the landlord’s going to find out about this and you’re going to get evicted. No, I just want the contractor to let me know they found a dog in the apartment when it was a no-pets property or people are smoking in there and there’s no smoking. I don’t want a discussion between the two of them. You see?

You want honesty, honesty, honesty and trustworthiness. Expectation of, you know, how people want to be contacted. Is it only text? Is it only phone call? Is it both? How much time should I expect before I hear back from you? You know, what’s your rhythm? That kind of thing. So that I don’t, somebody and they don’t get back to me in five minutes. And I’m like, come on, man, you know, this is not acceptable. You know, I might, I work with contractors sometime. I know.

when they’re doing heavier work, they’re putting their phone down and they’re not taking calls until they take a break. Yeah, right. But you want to discuss who’s selecting materials, who’s taking the materials to the job. Are they going to be delivered by the big box store? Is this landlord going to take them there? Is the contractor going to go pick them up? Are you going to give the contractor your card to charge things on hardware sort of stuff on your…

John Harcar (20:57.266)
and not taking their calls.

Joel Miller (21:21.024)
on your big box store account, you know, all that. You know, I could go on and on with what you need to discuss, but the point is discuss it ahead of time for all these pinch points that are going to cause drama if you don’t know how it’s supposed to be going in.

John Harcar (21:21.927)
Right.

John Harcar (21:37.926)
What it sounds like to me, and that was some great information. I so appreciate you sharing that. But what it sounds like to me is that just have conversation about everything that could possibly happen and might happen and have openness, right? But yeah, that’s some incredible information, Joel. And I’m assuming that’s probably all in your book.

Joel Miller (21:55.746)
Yeah, that is chapter three in the acquisition of property chat or excuse me, preparing a property for tenants or selling the property. And there’s a whole lot in there and we cover suppliers and all the other things that need to be lined up for a project. But the contractor part is all in there.

John Harcar (22:15.664)
If folks obviously want, they can find the book on Amazon and whatnot. If they want to get ahold of you, what’s the best way they can maybe reach out and connect?

Joel Miller (22:22.86)
Well, the website that is dedicated to the book is very simple. It’s joelmillerbooks.com. J-O-E-L-M-I-L-L-E-R-B-O-O-K-S.com. There’s actually a button on there that you can click on and see the entire table of contents. You can see the scope of what we’re covering there. And another button that will actually give you sample content, like two or three of the meatiest paragraphs for a

the media, yeah, the media’s paragraphs from each of the chapters. The chapters, I should say. Yeah, that you can see the writing style. It’s very easy to read. It’s a very big book. It’s called, it’s a big book. We owned it. It was getting long while I was writing, but I knew I had to get it all in there. And so it’s set up that there’s a whole lot of bold type words and sentences, paragraphs in there. If you did nothing but skip from bold type to bold type to bold type to bold type all through the book, you’ll get the whole idea. If think you need to know more, just stop and read everything.

John Harcar (23:21.096)
Right on. Well, Joel, man, thank you so much. You came on and shared a ton of information, guys. I hope you at home had a great podcast as well and took some good notes. Reach out to Joel, go on Amazon, get the book. What was the name of the book again?

Joel Miller (23:36.056)
Build real estate wealth. Enjoy the journey of rental property investment.

John Harcar (23:41.636)
Awesome. Guys, go get it. Joel, thank you again. And I’ll see everybody on the next one. Cheers.

Joel Miller (23:45.294)
Thank you, All right.