Advice on selling properties purchased from Morris Invest

[Georgie Coote]

My husband and I are investors who were caught in the Oceanpoint/Morris Invest mess. We purchased 2 duplexes and 2 single family homes in Indianapolis and two Jacksonville properties. Keeping it short; a year after changing to new property managers in Indy we have: 

• A 3 bed house that has consistently been rented and no problem.
• A one bedroom duplex which has been updated and ready for rent since October, still empty but a Section 8 tenant due to move in to one side.
• A three bedroom duplex which has caused us continual headaches with squatters and is supposedly finally empty waiting for a renovation estimate.
• A 3 bedroom home which is being currently being updated.

So after a year without rent, high stress and continual cash flow outwards, we are ready to just get the hell out. We are looking for some independent advice, do we bother renovating the duplex or just sell AS-IS? Are any of the properties worth keeping? Any recommendations on a trustworthy consultant we can work with to end this disaster once and for all? 

Thanks!

[Josh C.]

@Georgie Coote

Sorry you are dealing with this. This was fraud in epic proportions. But the open market is the best way to sell a home 95% of the time. So any decent real estate agent can list the home for you and you’ll get a large pool of buyers to look at it. Wholesalers other private buyer are good for when you need gone ASAP or don’t care about money and do care about the hassle. 

[Jay Hinrichs]

wholesalers will want to add 5 to 10k on to the price if not more..  keep in mind these are the same people that feed them the properties. LOL.

so they are buying them back and making profit again.

if you get them stablized then list them on BP marketplace or with agents.. probably your best bet.

No magic answer.. as it takes the right buyer to buy in those areas. regardless of condition of property.

[Hayley Wild]

George, 

What part of town is your duplex in? 

[Georgie Coote]

@Hayley Wild Its on Reisner St.

Thanks

Georgie

[Caleb Heimsoth]

@Georgie Coote. Sorry to hear about this. Have you figured out if the marker value is anywhere near what you paid? Typically with Morris invest the properties people bought were way overpriced relative to the marker value, meaning you could be taking a large hit if you sell.

I hope that’s not the case but it’s something to be aware of

[Georgie Coote]

@Caleb Heimsoth  Yes fully expecting a loss, just trying to minimize what that would be.  Wondering if we keep the properties, will it result in more of a loss in the long run with constant outgoings for repairs and empty properties.

[Caleb Heimsoth]

Originally posted by @Georgie Coote:

@Caleb Heimsoth  Yes fully expecting a loss, just trying to minimize what that would be.  Wondering if we keep the properties, will it result in more of a loss in the long run with constant outgoings for repairs and empty properties.

I have no idea on that as I know next to nothing about Indianapolis or Jacksonville but I imagine you will continue to have some issues.

I would find a good realtor to provide you comps for the area of where you’re at and then make a decision.  

[Ross Denman]

We have helped a couple of dozen MI/OP victims. Every situation is different. Most clients who have sold outright are $15k-$25k negative equity. 

Most of the homes are in very undesirable areas as well... so even renovating the homes may not make up for the equity problem as there isn't enough value add opportunity.

Homes that are in fair areas (C or C-) may be able to break even with a rehab as we had one that was close. I believe that they lost about $5k all total. We just had a closing last Friday on a home on the outskirts of an "up and coming" area. That owner "lightly" renovated the home and rented it out. It was rented at $640/mo (well below the median in Indy.) He was going to keep it, but kept having various issues. When the basement flooded and damaged the furnace... he decided that he couldn't keep taking these hits (that one was almost $3,500.) He was able to sell the home and break even.

Every case is different. Different locations. Different types of homes. Different levels of investment activity. I'm not a fan of throwing good money after bad, but it can work out in some situations. I would recommend talking to not only a realtor, but a property manager, and maybe a local investor in the area. The things that you will need to identify is:

• What are distressed homes selling for?
• What are mid-grade (rent-ready) properties selling for?
• Are there any "retail" sales activity in the area?
• What is the cost to renovate the home to a rent-ready state?
• What is the cost to renovate to a "retail sale" ready home (if there's any activity in that area?)
• What is the standard rent rate for the area?

After gathering that information, then you will be equipped to start making decisions.

Something else to consider... would be creative investment opportunities. While I would not typically recommend most of my clients to take on most Oceanpointe homes, you may find someone willing to take it on at an owner financing cost. Something like 10% of the selling cost down and about 25% of what the rent rate for a monthly mortgage. You can create terms that make sense for your situation. Maybe 3 years with a balloon at the end or a full 20 or 30 year term. This will likely help you exit profitably or close to it without having to put more money in to it... of course you will not be recovering your money until the term is complete.

The advantage of the above idea would be to allow an investor to own/control a property with limited out of pocket expense as opposed to purchasing the home for all cash and funding the entire rehab. Once the home is rented, they would have a little cash flow while still paying your mortgage. The out of pocket cost would just be the 10% down payment and the cost of the rehab (probably $20k-$30k). This would mean that they would likely be out of pocket around $30k-$40k to control a $600-$750/mo rental. As the area appreciates, they would hopefully be able to refinance to better terms from a bank at a later time and you could recoup your investment and hopefully capitalize on some profits.

[Nick Giulioni]

Hey George - just sent you a PM. Might have some options to find win-win.

[Jay Hinrichs]

Originally posted by @David Moudy:

Do you know estimated market value currently of the properties?

See if we might be able to work out a win-win scenario to help minimize your losses.

 unfortunately as Ross indicated these Morris Victims are not in a win win position.. its local investors wins Morris client loses in 99% of the cases.. sad situation thats for sure.. and whats more amazing is the guy is still at it and the regulators have not shut him down

[Georgie Coote]

@Jay Hinrichs  I know!  I just don't know how he is getting away with it.  

[Jay Hinrichs]

Originally posted by @Georgie Coote:

@Jay Hinrichs  I know!  I just don't know how he is getting away with it.  

it just takes these regulators usually 2 to 3 years to hammer them.. they know when the statue of limitations runs and usually show up at their door step at 7am when they are still in their PJs

https://www.sltrib.com/news/2017/10/12/utah-man-se...

Read up on Chad Deucher he had a turn key bizz like Morris.. wreck a ton of people like Morris in the end he got nailed.

these guys came into my Oregon office seeking financing when they were about 1 to 2 years in..  But the bottom line is they were using the D class assets as the base of their collateral or talking investors into buying them.. they raised a good amount of money through Alternative investment securities brokers mainly guys that rip people off selling high priced annuities..  I just looked at them and said DUDE this no work.. these assets are not sustainable for anyone but a local mom and pop who is in the asset what your paying for it.. not the inflated value your putting on them

[David Moudy]

Originally posted by @Jay Hinrichs:

Originally posted by @David Moudy:

Do you know estimated market value currently of the properties?

Might have some interested buyers on the back end - if you wouldn't mind shooting me the addresses.

See if we might be able to work out a win-win scenario to help minimize your losses.

 unfortunately as Ross indicated these Morris Victims are not in a win win position.. its local investors wins Morris client loses in 99% of the cases.. sad situation thats for sure.. and whats more amazing is the guy is still at it and the regulators have not shut him down

I think that this is true and agree with you. Morris victims are in a rough spot. 

However in a win-win both sides want different things. Out of the properties retaining as much possible money. And into the properties for the least amount of money. The win-win is found in the middle.

[Jay Hinrichs]

Originally posted by @David Moudy:

Originally posted by @Jay Hinrichs:

Originally posted by @David Moudy:

Do you know estimated market value currently of the properties?

Might have some interested buyers on the back end - if you wouldn't mind shooting me the addresses.

See if we might be able to work out a win-win scenario to help minimize your losses.

 unfortunately as Ross indicated these Morris Victims are not in a win win position.. its local investors wins Morris client loses in 99% of the cases.. sad situation thats for sure.. and whats more amazing is the guy is still at it and the regulators have not shut him down

I think that this is true and agree with you. Morris victims are in a rough spot. 

However in a win-win both sides want different things. Out of the properties retaining as much possible money. And into the properties for the least amount of money. The win-win is found in the middle.

 ya my point is the morris victims are just not in a position for any kind of win..  I mean even if you bought a good property if U sell it in a year or two sales costs will create a loss in almost all instances.. real estate usually has to be held 5 to 10 years in these types of markets to break even on the resale or make a profit.

[Account Closed]

Wow

[Cory Robinson]

@Georgie Coote  Its too bad to hear more of these stories.  If you are considering selling you should reach out to an agent about the details and they will act as your consultant.  Any reputable investor-focused agent should be able to quickly give you an opinion of value and whether or not it would be worth it to further invest in the property or sell "as is".  Its unlikely, but I've seen a few of these that were located in developing neighborhoods and sold for a fair price.

[Mindy Jensen]

Moderator Note: Please do not ask for the address, or offer to purchase or list these homes in the forum, this is considered deal making and is against our rules. Do not ask her to private message you, take the initiative and send her a private message instead.

I am really sorry you are in this situation, @Georgie Coote and wish you the best of luck selling these properties. I hope your loss is minimal.

[Joe Splitrock]

@Georgie Coote you have a PRO membership, so my suggestion is get the properties stabilized and rented, then list them for sale in the BiggerPockets Marketplace. 

I will caution that you come off sounding desperate to unload these properties. That is going to attract people who will try to take advantage so be careful.

Whatever you end up doing, do not contract them to a wholesaler. Wholesalers are the ones who feed the Morris Invest beast. They will pay way below market, only to sell it back to Morris. 

[Mike D'Arrigo]

@Georgie Coote I'm not surprised that the duplexes seem to be the worst of the lot. What you're able to do with them will depend on where they are located. I've had several Morris Invest clients ask me to help unload their Morris Invest problem children but unfortunately, most of MI's stuff was in rough, low income areas that don't fit our criteria.