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]

Hi @Aaron B. - Thanks for reaching out and offering your assistance! As you've read, there are definite concerns. The BP community is such a great resource! I will PM you right now!

-Tyler

[Aaron B.]

@Tyler Jahnke, no problem happy to assist other investors where I can. 

[Tyler Jahnke]

Hello Everyone,

Just a quick update here:

January 12 - Received my recorded Deed and Owner's Title Insurance Policy via email. I was directed to work with Paramount Title on closing the property.

Also, I'll be posting a few BEFORE pictures of the property in the upcoming days.

-Tyler

[Aaron B.]

Hey Tyler, I took some photos let me know how you would like to receive them.

[RI N.]

Interesting thread and has affected my decision to. It go with this provider until and unless resounding evidence of quality and customer service. That said I salute BP for communicating the highs and lows. I especially commend @Aaron B. for going above and beyond to drive by and take photos. This is true essence of community and I'm sure @Tyler Jahnke and the rest of the community are appreciative 

[Jay Hinrichs]

@Aaron B.  being a local what Is your opinion of the property,  the area,, etc etc.

I will be in Indy Tuesday and Wednesday this week checking on my projects....

[Tyler Jahnke]

@RI N. - I'm glad you are finding value in my post! The goal is to be as transparent as possible and document my honest experience with Morris Invest.

To your point, I ALSO salute BiggerPockets and it's amazing community of users. There is endless value here and I thank you all for being a part of it with me.

@Aaron B. - I cannot thank you enough for your amazing assistance and willingness to help! I can't wait to chat more in depth.

-Tyler

[Tim Ryan]

Agree with above comment.  Have been an observer following this thread since it opened and hope the dialog continues over the remainder of 2017 with updates from Tyler.

[Aaron B.]

@Tyler Jahnke, I just sent you an Email, with circa 15 photos of the home.  I will answer your PM questions in a separate PM.  Hope this helps.

[Aaron B.]

@Jay Hinrichs, the neighborhood is likely a low middle class neighborhood.  My lowly assessment is that the neighborhood appears to be on the decline.  One or two abandon homes some automobiles that haven't been moved in awhile.  The nice thing is that the homes are not compressed together.   Jay, if you need anyone to look in on your projects I can run by.  No big deal. 

[Jay Hinrichs]

@Aaron B.  as I figured  @Tyler Jahnke is in for an expensive lesson I am afraid.. but then again a lot of the west coast engineers and techies this is chump change so if he gets wiped out its only 30 to 40k

[Jay Hinrichs]

@Aaron B.  so Morris invest tells their clients they rent to doctors and nurses and other profesionals do you see this area as an Area a doctor would rent in ?????

Let me know if I can help you there I fund quick flip deals..happy to help

[Aaron B.]

@Jay Hinrichs, I think @Tyler Jahnke is learning on the fly and thanks to you and others he is more informed and has a good deal of information to make an informed decision. 

[Tim Ryan]

Originally posted by @Jay Hinrichs:

@Aaron B.  so Morris invest tells their clients they rent to doctors and nurses and other profesionals do you see this area as an Area a doctor would rent in ?????

Let me know if I can help you there I fund quick flip deals..happy to help

As someone who knows the Indianpolis area having my degrees from Indiana University, plenty of friends living in the area and spending time there often, I'd imagine the doctors and nurses comment comes from the proximity to Riley's Children Hosptial.  Just across the river where I'd imagine some of these properties are located (there are other areas within the loop of 465) are areas that you (Jay) consistenly discuss.  There are some great economic development plans for some of these areas and Indy is on the better end for being a landlord so still very curious how Tyler's experience plays out over this calendar year and appreciate the detail we are getting with these posts.

[Jay Hinrichs]

@Aaron B.  YUP  as in not to invest in any more hood rat properties that were bought for 5k.. lol.

not picking on him personally but I have been investing in Indy since 2003.. and pretty familiar with D class.. its unfortunate that a guy like morris with his star power in another field can dupe these folks into thinking these are some fantastic investments and they are going to find financial freedom in the hoods of the US>.  its quite sad the only one who benefits here is the promoter 5 years from now 75% or better of the homes they are selling will be sold to the next phase of 5k buyers of burnt out houses.. you simply cannot manage that tenant class ..

and I am sure you chuckled when I asked how many doctors were renting those.. but that is what others who talked to morris said..  Nurses sure... but doctors NO FREAKNG way. 

[Eddie T.]

Jay Hinrichs I agree with you why would someone like Mr Clayton who is a high income earner and already owns 50 properties that according to his numbers are generating 60% profit

50 houses
x 700 monthly rent
= 35k a month gross
x12 months
=420,000
x.60

= annual net profit

$252,000

According to the numbers they advertise that every keeps 60% after all expenses. If your already making 250k why take on the risk and the headache of a turnkey company if not just to make money off these uneducated investors.

[Jay Hinrichs]

@Tim Ryan  your dreaming dude.. if you think inner city ghetto properties change that quick

what has changed is Bates Hendrix  and fountain square were I have 20 plus projects going.

the hood is the hood.. these homes are in the hood."

my deals in bates and fountain I pay 70 to 100k for.. then remodel.. I just did one on Broad way that I sold for 525k.. which is big money for Indy.

sorry .. you can paint it however you like but this is a train wreck and those that are going to get run over are the CA buyers who know know better.

[Aaron B.]

@Jay Hinrichs, I would be shocked if any doctors and nurses rent in this specific area.  @Tim Ryan I think most local Indy investors have an idea of how this will play out.  Which is why I went out to help him.

[Jay Hinrichs]

@Aaron B.  your a good man Aaron I hope you tell Tyler the absolute truth about this ... !!!

[Craig T.]

Jay Hinrichs I'm new to bigger pockets and appreciate case studies like Tyler's as do other new investors. Like Tyler Jahnke I'm a millennial living in an area that is dominated by tech, but to surmise that 30-40k to Tyler Jahnke is chump change is unfair.

Yes, it's a learning experience, but we shouldn't taking jabs at his expense. The BP community wants him to continue to update us not discourage him by unfairly criticizing his decisions.

It's easy to Monday morning QB, and if we knew it all, what's the point of being on here? This is a platform to learn not criticize.

Tyler Jahnke I appreciate what you're doing on here. It's not easy to publicize the negative parts of an experience. Keep it up!

[Joel Owens]

Like I said been hearing this stuff on BP for about a decade now and the people that buy these things are never heard from again. They seem to disappear and stop posting on the forums.

I just haven't hardly seen any positive posts over the years on here saying they bought these type properties and years later have made a crap ton of money.

I HAVE seen some of my friends that bought at the very bottom in 2009 and 2010 where properties went for 50,000 and put 10,000 in repairs for 60k total and they rent for 900 at the time. Those were A areas to B + areas. They bought 10 of them cash. Now those properties are renting for 1,300 a month and about worth 140,000 each.

Everyone wants that today but that time PASSED years ago. What is left today is D to F trash areas where the hope of appreciation potential is slim to none long term. The vacancies, rougher tenant base, unstable incomes, higher crime and more blight areas. Now some investors will argue it is not a D area but a C - or something. I think people like to talk themselves into properties to HOPE it will turn out okay.

Now are there exceptions out there? Of course I can think of Dawn Anastasi and Chris Clothier with a few more but they run a business uncovering the diamond properties looking through many duds. The average investor just placing capital to buy something cheap is asking for a disaster to happen.

If an investor can locally they might try finding a property needing complete rehab in an A area to get the rents they want and close to the price they desire. A finished product in A to B areas for distressed pricing is almost non-existent these days so you have to create the value you want in a different way.

Rather than owning junk properties people might want to take that cash and place with a sponsor on higher end deals with equity gains on the back end that in 2 to 3 years time might double their money and have some cash flow before the sale.

Owning a small slice of something high quality is better than owning 100% of a risky junk property and area because someone can't buy 100% of a property in a quality area because of price.  

I am not a big fan of these properties simply because I have been on so many calls over the years with investors that bought this type of stuff and it didn't work out. They called me wanting to look at commercial as an alternative. They were lucky to get out breaking even or a small loss. Usually the buyer when they sold was a local guy who paid much less than they did for the property because they understand that rougher market and how to make it work which takes a special touch to handle high maintenance tenants.  

[Aaron B.]

@Jay Hinrichs, I did laugh at your doctors/nurse comment...I laughed harder in response to @Eddie T.'s comment, which I hope is meant as a sarcastic comment.

[Jay Hinrichs]

@Craig T.  fair enough  I live in Portland .. and yes its not chump change to someone.. but its not the end of the world for a 150 to 200k a year engineer  which are the vast majority of mid west investors from the bay area.. so I do apologize that I lumped all the engineers into one box.

however if you look at some of the original threads on this company you will see.. the top 4 or 5 turn key operators chiming in.. and for whatever its worth.. I have funded well over 2,000 deals in the mid west owned over 500 of these types of homes.. these are simply not appropriate investments for out of state investors. and its not the seller its the TENANTS your dealing with the lowest quality tenant in a given area.. those are simply rough.. and unstable and this leads to failed investments. where do you think all these homes come from.. its form failed landlords of that I can assure you.

[Jay Hinrichs]

@Joel Owens  I can personally assure you that @Chris Clothier  does not engage in selling these types of properties far from it.. they may have in their infancy but then learned QUICKLY that they were unsustainable like you said.. this is a train wreck and its just unfortunate that this provider has this star power on his pod cast that give investors some sense of security when in fact once they own the property its between them and their Ghetto tenant  LOL... Even the owner of the company probably does not realize what he is doing. 

[Jay Hinrichs]

@Aaron B. yes those numbers are a pipe dream as well.. but then you get on BP with a pod cast and there ya go... its one reason I have not done a pod cast in 3 years...