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!

[Samantha Soto]

You seem pretty confident that that SF bubble isn't going to burst any time soon @Diane G.. I've attended several REIA meeting lately focusing on market conditions and cycles in CA real estate, and the keynote speakers have all touched on the point that SF is at the peak right now. My friend bought a home in Oakland this past fall for almost 900k and the price has already dropped a bit since then.

Buy low, sell high...or just hold.  I too am of the believe that cash flow is king, and appreciation is just the icing on the cake.  

Thanks for sharing @Tyler Jahnke.  And thanks for being awesome BP Community!

[Amit M.]

@Diane G. I must second what @Account Closed stated. Your cavalier attitude about buying (especially retail condos) in SF or Bay Area, particularly in today's maxed out market, is usually not a great first investment for someone who isn't already wealthy. This is what wealthy out of country (many Chinese) who already made lots of money elsewhere do- they like to park their money in class A or B condos. And thy usually have the ability to ride the down market and negative cash flow (or they pay all cash) until they get their appreciation upswing. 

If you're trying to invest in SF or prime Bay Area now, you have to look for value added plays (which is what many investors are after, hence mucho competition.) And you need the necessary cash for the down payment, as well as the renovations. If you can swing that, you may be able to structure a deal that nets a small positive, or a small (manageable) negative cash flow. But, you will have increased the value of the property, allowing you to pull cash out for your next deal. It's slow going, and inertia is working against you, until you get to your 3rd or 4th deal. That, and an RE cycle of appreciation, puts significant wind to your back and makes your next go around easier. 

[Amit M.]

@Jay Hinrichs Wow Jay, you must tell me who your makeover coach is. Your impressive loss of weight and ability to regenerate hair is truly impressive! Plus it looks like you managed to gain a few inches in height too!

LOL southwest magazine article! 

[Diane G.]

@Samantha Soto

if you read my posts, I said many times that I believe we are at a peak... No doubt about that...That said, I also believe the entire US real estate market is at a peak, phoenix, austin, indy, memphis.... you name it....And some of the these locations are going to fair a lot worse than SF in a down turn....

@Amit M.

Not just the wealthy chinese investors can wait out a negative CF of San Francisco, many local people in the bay area can......Of course it would be nice if you can find a value add and force some appreciation out of it....

[Eddie V.]

@Tyler Jahnke

Thanks again for your updates. And thanks to everyone for your input. I particularly enjoy what @Jay Hinrichsshares.

Tyler, after seeing your photos, I remember hearing about WeGoLook(.com). An app as well. I've not used them but they offer remote eyes to photo and/or video a product or property not accessible to you. I'm sure there's similar but I mention it since it concerns me to receive such sporadic and limited details. I'm also one who personally photo documents like there's no tomorrow. Perhaps something like this can help inform you better.

If anyone has used them or something similar, I'd love to hear about it.

Otherwise we're all cheering for you.

[Tyler Jahnke]

Hi @Eddie V. - Thanks for the recommendation! I actually was thinking about doing some research on systems I can implement being out of state. This is very helpful and I'll look into it!

-Tyler

[Avi Garg]

Originally posted by @Account Closed:

@Diane G.
 

Please stop telling people to take a cash flow loss every month for the next 5 years. You might have been able to support it for years with your full time job, but there is no guarantee that @Tyler Jahnke can. 

You are extremely fortunate to see huge equity gains, but you cannot foresee the future 10 years from now. Telling Tyler that you will see $200K equity in 10 years is irresponsible and you might be sending the poor kid into bankruptcy. 

 Agree with @Account Closed

@Diane G.  - You do not have a crystal ball and buying -ve cash flow is insane. There are other people in the bay that still buy 3-plex and 4-plex at 6 cap and have positive cash flow.

[Bob E.]

@Tyler Jahnke  Good luck to you on this, we have several OOS rentals managed by various property managers and they are performing well.

[Bob E.]

@Tyler Jahnke  Good luck to you on this, we have several OOS rentals managed by various property managers and they are performing well.

[Roy Lin]

@Tyler Jahnke

First off, congrats on embarking on your REI journey! It's a huge step.

Secondly, I really appreciate you documenting to such extent your dealings with Morris Invest. I, too, am in California (LA) where home prices seem borderline insane. At one point in my short investing career, I was looking into turnkey providers like Morris Invest, but couldn't pull the trigger on them. I went an alternate path; still investing out-of-state. While it's easy for everyone to post success stories, it's way more difficult to post personal negative stories on an online forum, so thank you for having the courage to do so for our benefit!

Thanks again and keep up the updates! I'm very curious to see how it all turns out.

[Shiloh Lundahl]

Wow! What a great thread.  I just spent probably over an hour reading all of the comments here.  Not to make anyone feel uncomfortable, but speaking as a therapist, some people reveal way to much about themselves through their comments. (Haha).

Anyway, last summer my wife and I met a wholesaler in Indianapolis, Indiana, and we started to become familiar with the market. My wife went down there and ran the numbers on some of the houses and duplexes for sale and the numbers were really impressive. Then we both went out there and spent a few days getting to know the area and I really came to like it a lot. The city seems to be revitalizing. You will see one street with beautiful homes and the next street will have several run down homes and then the next with beautiful homes again. So I believe the city is revitalizing street by street. But I thought it was great. My wife and I would go running for exercise and we had a chance to look at several of the neighborhoods. It didn't feel scary or dangerous where we were (a little east of the down town area). We ended up getting 3 duplexes and 1 SFR last summer.

When we purchased the properties, we inherited some bad tenants and we had to put up some money to rehab some of the properties.  Our total out of pocket was about 200k.  With all of our maintenance fees, property management fees, ext. we only brought home one check for around $800 last year.  Very low return right?

However, as we have been able to bring in some better tenants and finished with most of the repairs. Now we have 6 of the 7 doors occupied and we brought in $1600 for January. So we are more hopeful this year. We are going to be closing on a business line of credit where we are going to be taking 60% of the equity out of the properties to be able to do more investing (that should increase our ROI).

I think you are smart by buying only one at a time rather than doing what we did by buying several all at once, but I think you get a better feel for an area when you have more properties there.

I think this is going to work out great for you.  Good luck and I think you will really like Indy.  Keep us updated.

[Tyler Jahnke]

Great to hear @Bob E. Best of luck!!

[Tyler Jahnke]

Hi @Shiloh Lundahl ! Thanks for taking an hour out of your day to catch up on the thread!! 

It's great to hear your story and your decision to buy in Indy. Congrats on JUMPING IN, understanding where improvements needed to be made quickly, and turning around your tenant/vacancy issues.

THANKS especially for the positivism! I really appreciate it!

I'll keep everyone updated.

-Tyler

[Par Attaran]

🤔

[James You]

@Tyler Jahnke thank you for sharing your experince and journey. It is very brave and informative what you've done for the community. I too am in LA and was considering reaching out to Morris Invest along with some other turnkey companies OOS. Congrats on your first move to your REI journey and hope it will be a very successful one.

@Roy Lin Did you go with another TK company to start investing out of state or another route? I too am from LA, and I've been exploring and talking with different TK companies for my first REI purchase.

[Tyler Jahnke]

Hello BP Community,

February 14 - Received additional photos of my property as construction has officially wrapped up and they are marketing the place for a tenant. New photos below:

New Vinyl Flooring in Kitchen

Refinished hardwood floors

Garage siding BEFORE

Garage siding AFTER

Main dwelling siding

Cleaned, sealed, and painted basement

I'll be reaching back out to Morris Invest as I want to see another full exterior shot of the property with construction complete.

-Tyler

[Eddie V.]

Maybe you can get a complete slow-paced narrated video walk-thru?

Originally posted by @Tyler Jahnke:

Hello BP Community,

February 14 - Received additional photos of my property as construction has officially wrapped up and they are marketing the place for a tenant. New photos below:

New Vinyl Flooring in Kitchen

Refinished hardwood floors

Garage siding BEFORE

Garage siding AFTER

Main dwelling siding

Cleaned, sealed, and painted basement

I'll be reaching back out to Morris Invest as I want to see another full exterior shot of the property with construction complete.

-Tyler

[Jay Hinrichs]

@Tyler Jahnke  smart move chronicling this one BP..  Morris is in damage control on social media so he knows your project is front and center so squeaky wheel..  I suspect they spent far more than 9k on your job just to keep them from looking totally foolish on BP

[Joel Owens]

If you look at the kitchen cabinets those are the cheapest of the cheap. I know that style and tenants will eat that top, drawers, and doors for breakfast. Make sure under the sink there at least a big piece of plywood that can take a water leak. Those cheap cabinets with any leak or water blow up like a balloon and crumble to pieces. 

I actually like the cabinets from way back that were solid wood. Those are built like a tank and you can refinish over and over again.

Just be prepared to have more ongoing repairs with the cheaper materials used on a property like that. Lower income tenants tend to live rough in properties.

There is another topic from years ago on bullet proofing rentals for low income tenants that had some good nuggets in there to try.

Not my cup of tea but hope it does amazing for you. Vinyl siding also can warp,get cracked. get ripped off in high wind,sun will fade it and then leftover pieces will not match when you replace years later.  

Hardi-plank tends to handle abuse much better over time. They built with vinyl siding in GA up into the 90's but you hardly ever see it anymore on new construction. It's all hardiplank now with stone or brick facade mixed in.   

[Tyler Jahnke]

Hi BiggerPockets Fam,

Just a super quick update here: I've finalized a trip to Indy in early March. I have a confirmed meeting with my property manager/general contractor and will have access to the property. First hand photos and video will be taken.

In addition, I have several confirmed meetings with investors, realtors, property managers, and turnkey companies. This should be quite the adventure! Looking forward to it!

-Tyler

[Maxwell Lee]

Have fun! I just took my "first" investing trip up to Indy last weekend and had a blast. But I kinda love that sort of thing...I drove block-by-block around a dozen neighborhoods of interest and mapped out where I want to be lol. Met lots of nice folks too. 

[Tyler Jahnke]

Awesome @Maxwell Lee ! That's my plan too!

-Tyler

[Amit M.]

@Jay Hinrichs LOL, I was thinking the exact same thing looking at those pics...."damn, they sure do work for cheap over there....all that for, ummm, only $9k."  

social

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[Diane G.]

Straight from Auction.com.... $34K and it is yours.......

https://www.auction.com/details/1076-waring-rd-memphis-tn-38122-1808392-o_844

[Maxwell Lee]

Actually that looks like it could be decent. It's got an AVM of $65k which, granted, is only one step above zestimate, but looks like basically everything in that neighborhood is $50-80k. And pretty large at just under 2k sq ft, in a seemingly low crime area at least on the surface. All depends on how much work is needed, which granted could be a lot.