Morris Invest Case Study

[Ian E.]

I want to apologize ahead of time for the long post but there are a lot of members asking questions about @Clayton Morris , with Morris Invest ( morrisinvest.com ) and not much information out there. I wanted to provide a case study on my time with the company and hopefully provide an unbiased “face based” documentation of my dealings with the organization.

In early July 2016 I heard about Clayton Morris, through his BiggerPockets Interview, which led me to the Morris Invest Podcast. I had bought a duplex a few months before and while it was a positive experience, traditional bank financing took forever so I decided to use cash for my next purchase. I spent a few weeks on vacation, listening to every Morris Invest podcast and over 30 of the BiggerPockets podcasts and decided I was going to buy another rental house.

When I got home from my vacation I looked on the Morris Invest website and couldn't find an available phone interview with Clayton for almost 3 months. I looked again a few days later and low and behold, a spot had opened up the next day. I immediately schedule the phone consult and impatiently waited.

I didn't end up talking to Clayton but I did get to talk to Dave (Client Specialist). He was courteous and intelligent and walked me through the process. I didn't get pressured to do anything and after our conversation I felt comfortable moving forward. Dave explained that he would send me details on a property and the first to claim the property would have the right to purchase.

The next day,I received a picture of a house in Indianapolis, with a sale price of $20k, projected renovations of $20k and projected rental price of $700 per month. I spent 24 hours trying to conduct my due diligence but by the time I was done, the property had already been sold to someone else. Two days later I received an email for a a $30k duplex with $30k projected rehab cost and projected rents of $1,300. I jumped on this deal and immediately go the house under contract.

The purchase only took a few days and by July 17, the house was mine. I was immediately handed over to Nicole, the Operations Manager, to start the rehab. She explained that 50% of the rehab was due up front, 25% after the crew was complete with half of the rehab, and the final 25% once it was complete. At first, email contact with Nicole happened very quickly, but as the renovations started it took longer and longer to receive a reply. I was able to get a scope of work (after a few requests), paid 50% of the rehab cost and everything seems to be going smoothly.

Aug 19 - I received my first set of pictures of the rehab and things look good. They crew built new kitchens, bathrooms, electrical, and replaced the flooring and new interior paint. I still haven't receive my deed or any official documentation that shows that I own the house other than a contract and purchase agreement. I also payed another 25% to continue the rehab.

Sep 24 - Received my second set of pictures showing the new plumbing and more of the interior. Everything looks good so I ask for some exterior photos and more information on the status of my deed and paperwork and am told the house should be ready in the next few days.

Sep 30 - have still not heard back from Nicole with the final pics of the rehab, status of the paperwork, and if we are ready for tenants.

So far, we have had a few hiccups and communication is getting slower and slower. We are over two months in and I do not know if the house is ready for tenants and I only have email contact information so I am in “wait mode”.

I will keep this forum up to date as I continue through the process so people can use it as a case study for Morris Invest. Please let me know if you have any questions.

[Todd Burton]

HEADS UP! Just heard yesterday that Oceanpointe is either changing names or adding an alternate management company: URBAN CONSTRUCTION MANAGEMENT, INC.

Morris is also promoting his new management company: BLUE SKY PROPERTY MANAGEMENT LLC

Same people, different names.

[Ian E.]

Sorry I have been MIA but I now have an interesting/disappointing development.  I have had my duplex for over a year and everything has been going well. Communication has been horrible but the rent checks were coming in. I felt like I had to be more understanding because I needed the PM more than they needed me and I have been out of the country for a while.

Last week I got my normal invoice but it was only for $650 instead of the $1,300 I was used to. I looked at the details and one of the units was "in collections". I was never contacted by Oceanpointe to notify me of the issue. I sent them an email but haven't been able to get anyone. I received a separate email today with an invoice for necessary repairs to make the unit rent ready.  There were some normal things like blinds and yard work but there was over $4k for carpet, vinyl, drywall and paint. There were no pictures or even an explanation as to what was happening and instead was just a button to accept of deny the suggested repairs. All of this work was originally completed when I purchased the house.

I have sent a few more emails to try and get current pics and more details on the unit but I am not hopeful. This situation caused me to jump back in the forums (I had been focusing on the blog and podcasts lately) and I saw all the discussion regarding @Tyler Jahnke's current situation and the possibility that some of the Morris Invest houses never had tenants.

I will let you know as soon as I hear more.

@Steve K. 

@Denny McKown

@Ryan Stucki

[Tyler Jahnke]

@Ian E. - definitely follow up on the $4k repair/maintenance quote they gave you before accepting anything. As the owner you have 100% right to know what’s going on and understand the condition of your property.

They should provide you with a detailed scope of work/quote related to ALL items needing attention. 

Best of luck and keep us updated!

-Tyler

[Paul Ewing]

This is why picking tenants is so important and why I manage my own places.  You just can't trust most property managers to do the required work to get good tenants because they really have no incentive to do it. In fact they are financially better off if they churn the tenants since they often collect signing fees and a percentage of the refurb bill. A $4k+ turnover pretty much kills a year of cash flow on a low to mid range rental.  

[Ian E.]

Completely agree @Tyler Jahnke. This was my first house and since then I have used my lessons learned to buy two more duplexes and I closed on a 4-plex in Dec. All of the properties are in the same area, with the same PM, and I have flown out to get eyes on before the purchase and continue building my team. The MI house got me excited about real estate but it has also helped me learn what not to do.

[Jay Hinrichs]

Originally posted by @Ian E.:

Completely agree @Tyler Jahnke. This was my first house and since then I have used my lessons learned to buy two more duplexes and I closed on a 4-plex in Dec. All of the properties are in the same area, with the same PM, and I have flown out to get eyes on before the purchase and continue building my team. The MI house got me excited about real estate but it has also helped me learn what not to do.

 if what your buying is low end C class or lower rentals.. get used to the high turn over costs and the churning of tenant it just is what it is.

also Never put carpet in these if you can at all avoid it.. these tenants will ruin them in a year like your seeing..  what one of my C class bigger opeators does though is if he has carpets.. he will clean them then just die them a darker shade until they are black literally.. before replacement  . if your buying strong B class your turn over issues wont be as acute generally speaking but these morris houses and any house in any city that is on the low end of the rental spectrum this is your tenant base. so account for turn over accordingly... boost your cap ex and maintenance numbers .. this will help to alleviate these large turn over costs... at least you know going in.

[Colin Zhu]

OK, I have some major updates regarding my investment with MI.

I had an inspector go out and take a look at it during construction and he found MAJOR problems ranging from possible asbestos insulation being airborne, lead-based paint cracking, cracks in the foundation and crawl space, old knob and tube wiring, moisture and mold issues, roof shingles replacement, and loads of other issues.

Rather than talking about them, I made a playlist of the inspection here: https://www.youtube.com/watch?v=aR2_h9onvFQ&list=P...

In order to fix all the issues, it could cost more than what I paid for the property itself. This is crazy.

@Jay Hinrichs

@Ian E.

@Todd Burton

@Son D.

[Brian Freeman]

I am having all of the same problems with MI and Oceanpointe. This is a nightmare!

Fake rents being deposited.  Vacancy without my knowledge for months.  Multiple lawsuits by the heath department.  Lies and cover-ups by Oceanpointe.  I am likely filing a legal action soon if this property is not bought back (rescission of contract). 

[Paul Ewing]

Originally posted by @Colin Zhu:

OK, I have some major updates regarding my investment with MI.

I had an inspector go out and take a look at it during construction and he found MAJOR problems ranging from possible asbestos insulation being airborne, lead-based paint cracking, cracks in the foundation and crawl space, old knob and tube wiring, moisture and mold issues, roof shingles replacement, and loads of other issues.

Rather than talking about them, I made a playlist of the inspection here: https://www.youtube.com/watch?v=aR2_h9onvFQ&list=P...

In order to fix all the issues, it could cost more than what I paid for the property itself. This is crazy.

@Jay Hinrichs

@Ian E.

@Todd Burton

@Son D.

About what I would expect for a pre-rehab on a $10k house.  

[Aram V.]

I'm having a somewhat  decent experience with Morris Invest. Not perfect but... I have bought 2 properties with them and things are rolling. The houses are definitely not worth 10k, more like 40k-60k range. Single fam and duplex. I' have mine in Michigan, looks like Indy has been a nightmare with Oceanpointe.

[Colin Zhu]

Originally posted by @Aram V.:

I'm having a somewhat  decent experience with Morris Invest. Not perfect but... I have bought 2 properties with them and things are rolling. The houses are definitely not worth 10k, more like 40k-60k range. Single fam and duplex. I' have mine in Michigan, looks like Indy has been a nightmare with Oceanpointe.

If you don't mind me asking, have you personally seen the properties or have had third-party verify the conditions of the properties? 

[Brian Freeman]

Aram, that was my problem. I thought everything was fine because rent was coming in for a year and I heard no bad news. Then rent stopped. Then I learned the truth. 

[Aram V.]

Yes, I have had a third-party verify both properties conditions.  It's only been 7 months.... but things seem legit on the up and up In Michigan in my experience... can't say anyting about Indy.

[Aram V.]

Originally posted by @Brian Freeman:

Aram, that was my problem. I thought everything was fine because rent was coming in for a year and I heard no bad news. Then rent stopped. Then I learned the truth. 

 what do you mean by "

Fake rents being deposited.

[Brian Freeman]

My property was vacant since October 2017 but Oceanpointe was depositing rent checks until March 2018. They never told me it was vacant until March, five months later after it was (destructively) vacated. 

[Aram V.]

Originally posted by @Brian Freeman:

My property was vacant since October 2017 but Oceanpointe was depositing rent checks until March 2018. They never told me it was vacant until March, five months later after it was (destructively) vacated. 

Thats very sketchy. Did you reach out to Morris Invest? They have been very responsive with any of my concerns.

[Eddie Knoell]

Brian, are saying this looks like a 'ponzi scheme'?

[Brian Freeman]

I’ve given a deadline for MI to make things right by this Friday. If things aren’t made square by then, I’m taking legal action and publishing all of the evidence and documentation that I believe all points to fraudulent misrepresentation. 

I want to believe he will do the right thing. 

[Aram V.]

Originally posted by @Brian Freeman:

I’ve given a deadline for MI to make things right by this Friday. If things aren’t made square by then, I’m taking legal action and publishing all of the evidence and documentation that I believe all points to fraudulent misrepresentation. 

I want to believe he will do the right thing. 

 I think you're doing the right thing. Let us know how it goes. 

[Colin Zhu]

@Brian Freeman Please let us know if they are able to meet the deadline. If you have to take legal actions, then I may follow suit (hehe).

[Son D.]

@Brian Freeman hope you blow them out of the water with your lawsuit.

@Colin Zhu brian has a bit of an advantage over us in the legal action department. Your home looks like it's cheaper to give you your money back than do work on it. Ironic thing is, with an honest company or flipper, it may actually look nice. Unlike those little garage boxes they sell for below 70k as a brand new sfh.

[Jay Hinrichs]

Originally posted by @Brian Freeman:

My property was vacant since October 2017 but Oceanpointe was depositing rent checks until March 2018. They never told me it was vacant until March, five months later after it was (destructively) vacated. 

 from my view point if there was no rental gurantee that they gave you when you bought which I have not heard anyone mention that in 1000 posts about MOrris.

I see this as one of two things.

1. total ineptitude on the Part of Morris and the PM  or Both.

2. as some others alluded to just your basic Ponzi.. paying to keep the Out of area investor from coming there and thinking their investment was secure and safe.. I mean you get a check you defend the company and you don't have a neutral third party check the house I mean why would you... this to me is MOrris doing damage control

Its a stain on the industry these guys plain and simple

[Todd Burton]

At the request of the owner, I went to 4 Morris / Oceanpointe properties yesterday. I did not go inside any of the homes. Here is just a sampling of what I discovered.

1. Vacant lot with nothing more than a promise to build a home; a terrible piece of property in a really rough area. Property is littered with trash which is a potential Marion County Health code violation just waiting to happen (if there isn't already one). Lots of overgrown & dead trees. The house next door is condemned.
2. The house appears to have major settlement and maybe foundation issues. Some rotten wood, stairs in disrepair, etc. I spoke to the tenant. He's paying less than the owner was collecting. Told me about extensive drug activity in the area. Said a bullet was shot through his window last summer. He said he's requested repairs from Oceanpointe but they just ignore him and have made no repairs. 
3. The house has terrible windows, exposed and rotten wood, trash all over the yard. I spoke to the neighbor, he said the house has been vacant. He has called the police multiple times because of drug activity in the house. He wants to rent the house if it is fixed up and offered to pay $450 a month. 
4. The house has a terrible roof, the chimney is in serious disrepair, exposed and rotten wood, etc. I spoke to the neighbor. He said the property is vacant. Lots of drug activity in the property. A few days ago he and the neighbor "cleared" the house and locked the back door and it's secure for now. 

In addition, an investor was in town yesterday and we were driving areas when he said, "Those are the houses on the Morris Invest videos".  All 3 were sold from 6/17-9/17 and all 3 are still incomplete. I ran the comps for the properties that are Active, Pending or Sold in the last 2 years within 1/4 mile and the highest price was $37k. I also watched his video on new construction; looks like he puts baseboard heaters in the houses. I didn't look in detail but I did not notice any A/C condenser either. Maybe someone that owns one of these can clarify this. 

Here are just a few pictures of the vacant lot, condemned house next to it and the other properties. (used with permission). I could post many, many more but you can get the idea from these. I've seen almost 2 dozen now and everyone I 've personally seen has been just as bad....

[Todd Burton]

@Colin Zhu

...sorry to see this Colin. That is some brutal video. One thing I can give Morris / Oceanpointe credit for is consistency. They are consistently horrible. 

[Jay Hinrichs]

@Colin Zhu   this is a civil Rico just waiting to happen.. to many players all conspiring to one goal and that is to defraud good honest investors..