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!

[Jay Hinrichs]

@Allen Harris  not to hijack thread  but  @James Wachob  has brand new construction at 120k or so in Memphis I went and looked at personally nice stuff you may want to contact him

[Jay Hinrichs]

@James Wachob I was thinking about those nice SFR's you have that are new ... not mansions

[James Wachob]

That home is the Pink Palace. Clarence Saunders, the founder of Piggly Wiggly, had the residence built in 1923, but lost a fortune and the home due to financial reversals on Wall Street.

[Jay Hinrichs]

@James Wachob  Piggly Wiggly is an all time great for a name of a company or grocery store for those on the west coast who have no idea

[Bob E.]

@Allen Harris  It sounds like you are in a good market.  A few links are below.  I would not make to big a deal about getting the rehab done.  Find a contractor and walk the property before making an offer- you should be able to get a good idea of what the rehab will cost and get a feel for how you like working with a contractor.

As an alternative, hire a property manger.  I put a link below for NARPM, call a few and see what they offer.  Any decent property manager will have contractors and can manage a rehab.  I have done gut rehabs from 2,000 miles away without ever seeing the property.  Feel free to reach out if I can help in any way - I have nothing to sell in TN so all I can offer is hones advice.  My contact info is in my profile.

NARPM (National Association of Real Property Managers)

Property Managers within 20 Miles

[Allen Harris]

Thanks, @Bob E. Love the support here!

[Maxwell Lee]

@Bea Cortis Send me a message and let me know what type of property and returns you are seeking. We're not a turnkey company but we have rehabbed over 30 properties now for ourselves and/or partners. We've even purchased, rehabbed and then sold properties to specific investors before. This is not our business model and we won't be managing properties for you, but simply that if it makes sense for all parties we can do it. At the least I'l just point you in the right direction. Plenty of folks on BP know I am more than happy to talk about Jax lol. 

[Aaron B.]

@Brian E., I am not sure your definition of 'C'.  For discussion sake let's use an 'A - D' grading system. I have only been through the neighborhood during weekday afternoons and the environment seemed ok.  Off the cuff, I would say the neighborhood is steady, however, there were a few houses in disrepair.  I recall there was one home that was being kept in nice shape and it stood out. (Which speaks to the neighborhood that I only recall one nice home.)  You can also tell a lot by the amount of rent being generated. My assessesment is that this is a C/C- neighborhood. The big question is will the neighborhood decline, hold steady, or rebound. 

[Brian E.]

@Aaron B. Thanks Aaron, that provides a nice picture.

[Colin Mooney]

@Bea Cortis,  I have talked with a lot of investors from California that are moving their money to the Florida market. I Work in St. Petersburg and there is a lot of potential in rehabs right now. If you are ready to go I would to be any form of assistance to you. If you would like to talk more about the market down here please feel free to reach out. 

[Gerald Pitts]

@Allen Harris, as another newb from Middle TN, I recommend joining / attending REIN meetings.  Have you been to those?  I've met a lot of folks that I'm already teaming up with.  Deals can be tough to find around these parts, but attending just a few of those has been already been massively helpful.  You also learn a ton. 

[Mary Ann]

@Tyler Jahnke any update?

[Tyler Jahnke]

Hi @Mary Ann and BP Family! Small Update here:

February 1 - Signed Property Management Agreement with Oceanpoint and sent them my direct deposit account information for rent. Here are the Property Management terms:

-$150 tenant placement fee per lease term.

-10% of monthly rent to property manager.

-Owner shall reimburse manager for all advertising expense upon presentation of bill.

-Maintenance services shall be provided at cost of $20 per man hour or at Cost + 10% for outside services.

-Eviction: $100 fee + court costs.

-Must provide 30 day written notice to terminate Property Management agreement.

I was also told I'd receive additional construction update pictures last week which never arrived. Will follow up tomorrow.

-Tyler

[Diane G.]

@Tyler Jahnke

Charge for repair, charge for eviction, charge for placement... So then what is the 10% PM for ? Just for collecting the rent? 

[Brian M.]

@Diane G. Those are all very standard PM fees.  10% is actually pretty good - and it's for managing the tenant (i.e. taking calls all hours of the day, scheduling repairs, collecting rent, etc.).  I have never seen a PM situation where the cost of repairs, eviction, placement, etc. was not in addition to whatever the monthly fee is.  Call around to some local PM companies if you want to verify.

[Jay Hinrichs]

@Diane G.  for that asset class those fees are low.. that company will have a hard time making money and staying in business with that low of fees.. they are dealing with HIGH touch high turn over assets.

[Tyler Jahnke]

Hi @Diane G. 

 @Brian M. described the Property Manager's responsibilities pretty well. Here's a more detailed answer:

https://www.thebalance.com/what-is-a-property-mana...

-Tyler

[Diane G.]

@Brian M. @Tyler Jahnke  Thanks 

@Jay Hinrichs

It means that a OOS property needs to out perform by 20% year over year just to match a CA property, right? 

[Jay Hinrichs]

@Diane G.  not sure what your comparing it to though.

but take Tyler for instance.. he plunked down some amount of cash I would suspect and pure guess in the 40k range for this property.. he could alternatively gone to Richmond CA and bought small bungalow or duplex for 200 to 225k and put 40k down and would cash flow neutral.. but his tenant would be paying down his mortgage note...  so I guess if you compare to that..

but you have a huge amount of folks that think the ONLY good investment is if its positive cash flow day one... now I agree with that in certain areas and or certain assets.. if they won't appreciate then of course you need positive cash flow to make sense of it.. but if you in areas that historically go up... then whats 100 a month going to do for the average person living in the bay area..  So you don't buy because the asset does not make 100 a month or it may cost you 100 a month.. ???

All of my best deals that I have made the most money on were negative cash flow deals.. LOL

[Ayodeji Kuponiyi]

@Tyler Jahnke Thanks for sharing your experience thus far. Please keep us updated.

[Bea Cortis]

@Jay Hinrichs you are an inspiration, thanks for sharing your industry knowledge with us newbies...

@Tyler Jahnke, you seem to have got the best end of 'Morris investing'.  Two and a half weeks and I am yet to receive a property listing email.  Follow up today and received an email referencing a Turnkey property with no attachment in a high crime area.  Hands down..taking my chances with Roofstock. Thankyou for sharing your journey and best of luck.  

[Jay Hinrichs]

@Bea Cortis   use your best judgment here...   this simply is not how the industry operates.

Call any number of other turn key outfits to see how they operate.

and thank you for the kind words..  there are good folks and properties to buy out of state its just not wise to buy the lowest price point in a given major metro area East of the Rockies .. simply put they are war zones  High crime and management nightmares.. this company has already had many of its unsatisfied buyers starting to reach out to locals in Indy and are jumping ship ... either not closing or have realized what they bought is not what was advertised..

batten down the hatch's my mom lives in Napa and she said its going to be rainy again this week.

Best of luck in your search.

[Mike D'Arrigo]

I agree with @Jay Hinrichs. There are a lot of good turn key companies--many of them here on BP and that's not how they operate at all. I've been involved in the Indianapolis market for 6 years and I can tell you that those low end properties don't perform unless you are local and hands on and even then it's pretty difficult. Your turn overs will kill you.

[Account Closed]

A, B, C, D, E, F, G neighborhood... The most important part of buying rental homes is the tenant screening and the property management. Knowing you have a fully screened tenant with good history is very important. Just as important as knowing your property management processes.

[Cosmo Lee]

@Tyler Jahnke

Thank you for your detailed posts on how you got started and the ilk.  Much like yourself, I'm based in very heated housing market in California and was researching investing out of state.  Will be following this!