Morris Invest Case Study 2.0

[Tyler Jahnke]

Hello BiggerPockets!

I stumbled upon the Morris Invest Case Study by @Ian E. and am now inspired to document my current investment with the company. This is kind of a long post, but I hope you stay with me. Clayton Morris (founder of Morris Invest) has an amazing front facing impression with his valuable podcast (I listen to it everyday) and the multiple interviews he's had with reputable sources (BiggerPockets, EOFire). That's how I got hooked on the buy and hold model his company sells.

Even with all that exposure, and the fact that he's a TV host, it was hard to find and really dig into the details of his company online and there's not a lot of specific content on Morris on BiggerPockets. So here's what transpired:

November 12 - Had a scheduled call with Morris Invest. Thoughts: first, I thought I'd actually be on the phone with Clayton, but it was with Larry, who is an Acquisitions Manager. He gladly answered the 20+ questions I had as if he was reading a script. I get it, he gets the same questions all the time from new investors. Very friendly and easy to talk to. We ended up talking about a couple properties at the end of the 30 minute call and he said he'd email over additional details.

Couple days pass and no email from Larry regarding properties.

November 16 - I assumed I'd get an email from him within 24 hours maybe even 48 but nothing came through so I gave him a call. He explains he sent an email the same day we spoke. I check my SPAM folder, and sure enough it's sitting there. Can't blame this on Morris Invest, feel a little embarrassed, and assess the properties. One of the properties catches my eye:

Acquisition: $24,000 + Rehab: $15,000

Rent: $600

I do my research - LOTS of Google Street View, research on Zip Code, crime stats, Zillow for home value and comp values (I know, not the best) tax numbers. At this point I'm VERY interested and have cash ready.

November 18 - Another Call with Larry for additional questions on the specific property. I ask about everything from Inspection Reports, rehab details (I have specifics for what I want in a rehab), potential scope of work, etc. His general answer was: he'll have my answers by November 22.

November 22 - I follow up with Larry via email as he said I'd have final answers to my questions today.

November 23 - I receive an email from Larry stating the property I'm interested was SOLD over the weekend. He attaches another property in the email for me to look at. I am not interested as it sits directly next to a bar. He states I need to put a property under contract as soon as possible if interested otherwise it'll get picked up quickly.

Obviously, this was not the best example of communication, and set me a little off. I began to question investing with Morris Invest.

November 30 - I receive an email from Larry checking in saying he hasn't forgotten about me. He has some properties becoming available soon. I appreciate this communication and am glad he checked in.

December 5 - I get a property from Larry that catches my eye! $37,000 acquisition + $9,000 in renovations. Should rent at $750/month. I get introduced to Nicole, Operations Manager, I ask to put it under contract, but don't sign just yet.

December 5-7 - I send a couple emails to Nicole regarding the Purchase Agreement, but don't get any answers. I get them answered by asking a colleague who owns his own Realty company. I send another email to Nicole as I need my name revised and cc Larry on the email in for hopes of a prompt response.

December 8 - I sign the Purchase Agreement. Introduced to Danny for Insurance (answer three questions he sent via email) and Daniel for Title work (also answer 3 of his questions via email).

December 12 - I finalize Insurance on the property.

December 13 - Check in with Daniel as I didn't get any updates on closing or next steps after answering his initial questions on 12/8.

December 14 - I receive closing documents, wire instructions, and title work. Need some time to read over everything before signing.

December 15 - Nicole said I'd receive the Scope of Work before closing, but didn't yet, so I check in with her and get it.

December 16 - I send over closing documents, wire money.

December 22 (TODAY!) - I receive the final closing package from Title company with all signed documents. They're saying I should get the Owner's Title Insurance Policy and Deed via email in a couple weeks.

I also am now officially in the rehab phase. Nicole reached out with the Scope of Work and wire instructions. I pay 50% of rehab cost to start construction, 25% in 3 weeks, and the last 25% at completion of renovations. I responded back with numerous questions regarding the Scope as I really want to know where my money is going. I have not wired anything yet. The scope had a number of typos and unreadable line items. Hoping I get a response soon!

I'll keep you all updated!

[Tyler Jahnke]

@Brian Freeman - You inspired me to document my experience with Morris Invest and I will be doing so here. Wishing you the best of luck man!

[Brian Freeman]

This is great info Tyler.  Thanks for sharing your experience.  I hope the rehab goes quickly and you start rent-rolling ASAP. I'll be watching this thread evolve!

[Dino Cardamone]

Thanks Tyler for giving us your detailed play-by-play of your experience.  I'll also be watching this thread closely as I am also interested in investing with Morris Invest.  Best of luck and I look forward to seeing what transpires for your deal!

[Tyler Jahnke]

HI @Dino Cardamone - You are welcome! And thanks for following along! The BiggerPockets community is like family and I appreciate your support through my new investment venture!

-Tyler

[Joel Owens]

Tyler good luck with low income tenant type properties. Report back in 2 to 4 years what the property is worth now versus when you purchased and the cash flow you have achieved.

Over the last decade on here people have post after post of buying these types of properties but never come back to give long term success stories with them ( promoters with self interests excluded and shills for them).

5 to 6 years ago you could buy A to B locations in that pricing and it made sense because of equity and rent growth upside. Now those areas are priced out and you get C to F areas that have little rent growth over time and a suspect tenant base for long term investment potential.   

[Tyler Jahnke]

Thanks for your input @Joel Owens Happy Holidays!

[Maxwell Lee]

Congrats, @Tyler Jahnke Looking forward to hearing more of your story play out...fingers crossed that it continues well!

[Jay Hinrichs]

@Tyler Jahnke  with all of that you still closed ??? amazing.

and how is 9k a full rehab ?... boy the power of a podcast is truly amazing.

[Donnie N.]

@Tyler Jahnke  Thanks for documenting this. This is helpful. I think many are following it with great interest. 

[Par Attaran]

Originally posted by @Jay Hinrichs:

@Tyler Jahnke  with all of that you still closed ??? amazing.

and how is 9k a full rehab ?... boy the power of a podcast is truly amazing.

 yeah I am surprised too....

I was close to contracting with them. (I listen to the Podcast and enjoy Clayton so I wanted to give them a shot) They sent a property, I then emailed them asking "how old the roof was?"  Got an email back 2 days later saying "It was sold" LOL WTF ?!?! Really?  

After that it was abandon ship.

[Tyler Jahnke]

Hi @Par Attaran - Just to clarify with everyone on this post regarding the rehab costs: I am not paying for a FULL REHAB at $9k.

The house I closed on is already in decent shape and doesn't need a new roof. I'm putting in a new furnace with duct work, new front and back doors, refinishing the hardwood floors, exterior paint, new breaker box and electric, new gutters with soffit and fascia repair.

Happy New Year!

-Tyler

[Brandon Stevens]

GL Tyler, try not to be discouraged by some posters. It sounds like you did everything you could to vet the property from out of state. Maybe it works out maybe it doesnt, if nothing else Im sure youll learn a lot from the experience. Just getting going is more than most.

[Jeff Schechter]

Some of the team that we use for our inventory are the same people that Clayton is using.  If it is indeed the same people, I can assure you, you WILL make good money!  The product is sound.  We've had EXCELLENT results with these guys.  Based on your report (and thank you for that) it just appears that there may be a customer service issue.  Hang in there...your big picture will prove out to be pretty!

[Tyler Jahnke]

Thank you @Brandon Stevens for the support! I am really amazed how strong the BP community is. It really is a COMMUNITY providing amazing support.

Like you said, maybe it works, maybe it doesn't, but either way I'm LEARNING A LOT!

Happy New Year to you!

-Tyler

[Tyler Jahnke]

Great to hear @Jeff Schechter Thanks for chiming in!

[Tyler Jahnke]

UPDATE TO MORRIS INVEST CASE STUDY 2.0

December 22 (RECAP) - Received final closing package with all signed documents. Also received the Scope of Work: roof repair, exterior paint, replace rear siding, new exterior doors, new gutter, soffit and fascia repair, clean and seal basement, electrical repairs and new breaker 100 amp breaker, refinish hardwood floors, new vinyl kitchen floor, new furnace and duct work - Estimated $9,100 total.

I responded with following questions:

1. What is the expected start date and completion date of construction?

2. Can you provide both BEFORE and AFTER pictures of each item on the scope?

3. Please provide further details on each line item:

-Roof repairs: Are you patching or replacing?

-Exterior paint: does this include facia, soffit, windows, and doors? Are you sanding/priming? What color?

-Exterior doors: what quality doors are you putting in? are you changing the hardware?

-Gutters: are these galvanized?

-Vinyl floors: are you doing solid vinyl?

-Hardwood floors: are you doing a sealer coat? how many top coats?

-Furnace: what brand of furnace? is it high efficiency gas? how many BTUs?

4. What are the warranties on the work?

5. Does this contractor have insurance?

6. Do you sub out the work?

7. Are you installing new smoke alarms?

8. Does the garage need any work?

9. What appliances are in the house?

December 28 - With no response to my questions through the Holiday weekend, I reached out for an update and status. Here's the email I received:

Hey Tyler

I hope you are enjoying the holiday season!

Your property has already begun construction and it typically takes about 6-8 weeks to completion, weather dependent of course.

I am gathering detailed answers to your questions from the crew and as soon as I have the answers I will forward to you. Thanks!

That was obviously not the response I was expecting, considering I didn't approve construction or receive answers to my questions.

December 29 - Received a THANK YOU CARD and CAKE from Morris Invest for closing. Very nice touch from @ClaytonMorris.

[Eddie T.]

Tyler Jahnke do you have photos of the property you can post here. We could look them over and see if some of those items in the scope of work are unnecessary.

Not sure how all of that is getting done for 9k. A new 100 amp panel is usually $1500-$2000 on the low end alone.

[Jay Hinrichs]

new hvac new roof paint of any good quality in an out.. doors  gutters.. Probably needs water heater electrical panel. all this stuff is NOT going to get done for 9,100.  that's for certain.. unless its just lipstick rehab.. What your describing is 20 to 25k for a full rehab.

no mention of cabinets toilets  condition of tub and surround.. appliances as you mentioned.. although in these low end rentals Stove only is appropriate in most instances..

Go to Eliteinvest.com in Chicago look at what a real full gut rehab is and compare.   When you get your pictures.

[Tim Puffer]

Would love to see before and after pictures and what the final cost of rehab ends up being. @Tyler Jahnke definitely keep us updated!

[Joel Owens]

"December 22 (RECAP) - Received final closing package with all signed documents. Also received the Scope of Work: roof repair, exterior paint, replace rear siding, new exterior doors, new gutter, soffit and fascia repair, clean and seal basement, electrical repairs and new breaker 100 amp breaker, refinish hardwood floors, new vinyl kitchen floor, new furnace and duct work - Estimated $9,100 total."

Couple of things:

1. Says ESTIMATED total of 9,100. You would need an agreement in place for cost overruns. Contractors tend to suck people in with low estimated repair totals and then say they find all this stuff that needs replacing and the cost goes way up.

2. Says roof repair & does not say roof replace so by the description only it looks like a patch job.  

3. Replace rear siding but not the other siding. Typically on old houses it's cheaper for a seller to put vinyl siding over old asbestos boards then replace and ripoff. There are a host of problems down the road that can happen from doing this.

4. Soffit and fascia repair - this does not say replace. Sounds like again they are patching for as cheap as possible. When you patch things for a temporary fix then you tend to have ongoing issues in early future years. You would need to see what the warranty is for the repairs and for how long. Look at the contractor company doing the repairs. How long have they been in business? If not long they could get future claims to mount up on a warranty if any and shut the company down and restart under another name. This is why it is just as important as the work performed for the price who you are dealing with if issues arise down the road.

5. If they will not provide pictures of before and after that is a huge RED FLAG. You cannot see what level and quality and how they are doing the repairs with the process.

6. Why does the basement need sealing? Have there been a bunch of water leaks?If so sealing won't do anything. From your post it looks like you didn't have a property  inspection by an independent third party and are going by what they have told you it needs to be a functional rental.

7. For electrical you need to know if they are replacing the whole panel and if there is old knob and tube or other wiring in the house where it is spliced inside the walls. If they are taking out a few breakers and a fire happens insurance will typically not cover anything. They will say a whole panel with all new wiring needed to be replaced and the breaker brand going into the old panel was not the same so the claim is denied.

I don't know anything positive or negative about this company. From the way you explained the process a property is simply sold to whoever asks the least amount of questions and buys the property sight unseen.  You get sent a cake instead of answers....... : ) Maybe after the sugar rush you will forget your questions!....... lol

I do not think people on here are being negative just giving decades of experience. You might not want to buy more than one property with this company until you are many months to 1 year in to see how it really goes over time.

No legal advice given.   

[Eddie V.]

Late to the party on this thread but thank you for sharing as I've looked into Morris Invest, had a conversation with Larry and exchanged a couple of emails. I decided not to pursue further since I was not feel satisfied with their response time and the lack of information provided. Some of my questions went unanswered. And they never followed up.

Just a very minor add to the great advice and detail from @Joel Owens. I've no SFR experience yet but in my limited experience with NYC mixed-use, I require product receipts, manufacturer warranties, etc on new items. There are contractors who recycle-refurb-reuse from other jobs: furnace, panels, sinks, whatever. I work with a GC who provides these immediately upon request with the given that fair markups are added. While not for everything or everyone, at least I know something about what I'm getting.

Good luck and please keep us updated...

[Tyler Jahnke]

Hi @Eddie T. and @Tim Puffer - I will post what I have as far as pictures go. Have had a pretty busy holiday season!

@Joel Owens - Thanks for the very in depth insight on each question I posed. I really appreciate it!

The last communication I had with Morris Invest was on 12/28 when they stated they were gathering answers from the crew. I will keep everyone updated! @Eddie V.

[Craig T.]

@Tyler Jahnke You made it through the fog and purchased your first property, congrats. 

[Tyler Jahnke]

HAHAHAH Thanks @Craig T. !

[Aaron B.]

@Tyler Jahnke hey nice to see you giving back to the BP community.  Your thread will help a lot of folks.  That said, I have read your thread and pieces of it are a bit concerning.  I would be happy to go over and look at your property.  I know if I were in your shoes I would want someone to head over (ie...boots on the ground).  The old saying, "trust but verify."   Feel free to PM me.