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!

[Joel Owens]

I think people do not calculate the toll the lower end properties take on investors with years of ownership.

Even with management in place there tends to be more problems with those properties over time.

The emotional toll alone owning a low end rental portfolio over a decade is enough to make me cringe.

Time is something we never get back. I want to own assets where i can enjoy my life with little to no worries. I don't want to deal with massive headaches  for extra perceived yield. 

The older investors I know horde and value time and not cash for headaches.  

[Brian M.]

@Chris Clothier  

Hi Chris - I appreciate your insights here.  There certainly may be some loss aversion that drove Tyler's choice.  However, these two types of investments are different and require different resources and timelines.  For some people, taking out a large loan on a property and earning no cash flow for a long time is just not their thing.  I can certainly see the appeal of a low cost property that you own outright that cash flows immediately vs. a long-term investment where you are paying a mortgage every month and hoping for appreciation.   I have done both and they both have their positives and negatives - and their fair share of risks.  I know there were many who purchased in CA in 2006/2007 who wished they hadn't and paid a life-changing price for it.

One area we will have to agree to disagree on is your matter-of-fact statement that you are "almost always guaranteed to lose."  I know many RE investors who have purchased low-cost rental properties like this and have turned a profit for decades - one of them was my father, so I saw it done first-hand.  Managing expectations is key.

[Chris Clothier]

Originally posted by @Brian M.:

@Chris Clothier  

Hi Chris - I appreciate your insights here.  There certainly may be some loss aversion that drove Tyler's choice.  However, these two types of investments are different and require different resources and timelines.  For some people, taking out a large loan on a property and earning no cash flow for a long time is just not their thing.  I can certainly see the appeal of a low cost property that you own outright that cash flows immediately vs. a long-term investment where you are paying a mortgage every month and hoping for appreciation.   I have done both and they both have their positives and negatives - and their fair share of risks.  I know there were many who purchased in CA in 2006/2007 who wished they hadn't and paid a life-changing price for it.

One area we will have to agree to disagree on is your matter-of-fact statement that you are "almost always guaranteed to lose."  I know many RE investors who have purchased low-cost rental properties like this and have turned a profit for decades - one of them was my father, so I saw it done first-hand.  Managing expectations is key.

 I agree with you that these are very different investments.  You are 100% correct so its hard to correlate loss-aversion on this.

And you and I actually agree on your second point.  I was careful to use the word TURNKEY when discussing these low price point investments.  Perhaps your father bought his properties turnkey and was completely passive.  I doubt that is the case, but would love to know if your father was hands-off.

That is where investors get absolutely screwed on these investments.  They require a lot of work and attention.  I too know many investors who buy very low cost properties and own them for cash and collect rent weekly and a few collect monthly.  Either way, they are not relying on a passive investment company to manage the properties.  They are not buying in cities 1,000 miles away from where they live.  They are buying in the same city they live and know on the front end the amount of work it will take to make them profitable.  And many are very profitable with scale.  Either way, they know, as you point out, exactly what to expect.  I would love to know if your father was a hands-on owner at these price points or if he was passive, buying out of state and relying on a turnkey type company to manage them. 

When these properties are offered as Turnkey investments is where the trouble begins.  The economics simply do not favor the investor.  

[Diane G.]

@Chris Clothier, @Brian M.

Brian, I too, like to know in detail how your dad managed to turn a profit... I have two reference points that pointed the exact opposite directions and so I am curious to know your dad's experience...

My reference point #1 - this is when I was going to school at Ohio State Univ... I was waiting on tables to make some money... The owner of the restaurant had some rental properties somewhere near downtown.. Everytime he went over to collect rent, he literarily put on bullet proof vest.. And he was actively looking for ways to "give away" the properties to some non-profit... So I imagine he was not making any money there...

My reference point #2 - I have a friend now who bought a 23 units in a D area in Phoenix back in 2013.. Told me had 3 murders in the property in the 3 years he owned it... Just 1031 that 23 units into a 44 units in a similar D area.. So I imagine he is making money.....

[Alan Grobmeier]

@Tyler Jahnke  Any updates?

[Kin Lay]

@Tyler Jahnke I have not have the time to fully read all those responses that you put there, but you give me confidence and inspire me to try my first rental investment. Thank you. Did you pay all cash or 20% down payment?

Just curious, do you happen to graduate from UC Berkeley too?

[Edmund Ricker]

@Tyler Jahnke

Congrats on your investment.  I have only skimmed over the thread and paid attention mostly to your pics and updates.  I did have a phone call with a rep from Morris Invest last summer and I was not sold on using them to invest outside my area.  In the end, I decided I did not want my first investment to be a long distance one.

It sounds like you have had a few hiccups along the way, but that you are on the right track.  I wish you all the best and continued success.

Ed

[Bob E.]

Not every turnkey is in a BPV (Bullet Proof Vest) Zone.  We have bought property for 5 or 10 k that turned out to be good neighborhoods and rent for close to $1,000 a month.  One of them required major rehab and we were all in 40k, the other we were all in for 20k, these were direct purchases made in OOS markets.

[Aaron M.]

@Tyler Jahnke, thank you for your willingness to share your experiences with Morris.  Thx for letting us go along for the ride, in a sense, with you.

[Kin Lay]

Has anyone else invest in Morris Invest? Can anyone provide the street name of the investment property, rehab company name, and property management name? I want to research it to see if it's legit. I found this article and it seems troubling to invest in Indianapolis. What do you guys think?

@Bob E. Is that in Arizona?

[Bob E.]

@Kin Lay  One was in Milwaukee and the other was in Lansing MI.

[Jay Hinrichs]

@Bob E.  to be fair bob you were not buying turn key like the OP on this thread .. you bought notes you foreclosed on correct ?

[Bob E.]

@Jay Hinrichs These were REO purchases from hedge funds. Not notes but not turnkey either.

[Michael Bracken]

Finally I made it to the end of this post! What an emotional ride. I have local experience with class D homes in south Dallas. There is a block by block technique I learned. Don't know exactly how to "correctly explain" in a public forum. Would be glad to by PM.

[Kate Stephens]

Tyler Jahnke brilliant post and updates. Thank you! It is close to midnight so whilst this thread has not helped me sleep it has helped me enormously as I am a CA investor looking to invest out of state. I bought a turnkey property with Ohio turnkey in Dayton and my experience so far has been good. I've checked out the excellent turnkey web site but I am still unclear as to which are the trustworthy turnkey companies in Indy. Love any feedback and perspective. Thank you to the BP community for your outstanding contributions

[Ian E.]

Just wanted to give an update on my original "Morris Invest Case Study". I have had both sides of the duplex rented for the past 5 months and so far, everything has been good. Best of luck to all of you!

[Kin Lay]

@Ian E. how much did you pay and what's the rent? Thanks!

[Jan H.]

@Tyler Jahnke- Great

[Eugene D.]

Hi Tyler.  Any update on your experience with Morris Invest?

[Andrew Johnson]

@Tyler Jahnke Any updates?  It's been a few months, curious to see how it's progressed.

[Jean Nicolas]

Hello Tyler and BP community,

Thank you for your Case Study and comments. Kept hearing about the turnkey returns on their podcast and decided to book an appointment.

After 3 weeks of waiting, I interviewed with Morris Invest yesterday, and talked to Larry as well. We agreed to have a follow up discussion later this week after I reviewed the link and customer feedback. The was no info on past performance and the link provided a few pics of "one" rehab.

I'm sure Morris Team are wonderful people as it shows in their podcast and following. We live in an age were full transparency is inevitable whether voluntary or involuntarily through social media such as these.  Needless to say I won't be moving forward.

[Tom Ott]

Sounds like you have some more research to do! Good luck!

[Tyler Jahnke]

Hello BP Peeps!

I've been out of the country traveling Southeast Asia the past couple weeks (and am still out here) so I haven't been able to provide any updates. But, as a follow up to my last update:

I was to receive my first rental deposit "between the 21st and 26th" of each month. My first deposit is scheduled for the amount of $600 ($750 gross rent - $150 lease up fee).

I have not received my first rental deposit as of writing this. I just emailed my property management for an update. Will let you all know!

-Tyler

[Tyler Jahnke]

It's official! I finally got my first rent payment yesterday sent to me via direct deposit. So that's a little sigh of relief. Here's to hoping this tenant pays on-time consistently and for the remainder of the 12 month lease. Happy Investing!

-Tyler

[Ian E.]

@Kin Lay The duplex was $30k needed $30k for rehab and rents for $650 per side.