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!

[Eddie T.]

@Andrew Buchanan do you have before and after pictures for us and cost of rehab we are here to help and make sure you are not overpaying.

[Nicholas M.]

Originally posted by @Account Closed:

...

@Nicholas M.'s review of Morris Invest is like reviewing Pizza Hut based on the phone call to order, and then saying they're awesome at pizza..... you need to wait for the delivery and actually TASTE the pizza before you can review.  

It's sad when even the posts made in the spirit of collegiality are attacked... Your comments aren't worth addressing beyond stating the obvious: you're in for a terrible ride if you make your investments like you order your pizza... But I'll give you the benefit of the doubt and chalk the shortsightedness of your analogy up to overly simplistic reasoning.

It goes without saying that one doesn't care at all whether the experience of ordering pizza is a pleasant one, but the same cannot be said about purchasing property, spending $50-$100k, making a serious investment or commitment to a years-long project, etc. 

Best of luck to you!

[Andrew Buchanan]

Originally posted by @Eddie T.:

@Andrew Buchanan do you have before and after pictures for us and cost of rehab we are here to help and make sure you are not overpaying.

Hi Eddie, I have not received before / after pics yet.  I believe that even since Tyler went through his journey they have altered things, so they are definitely not big on sharing status until they are done, and are targeting largely hands off people who don't care / don't want to think about it, and Clayton was very honest with me about that. Very nerve-racking for me being my first experience for sure, which is why I posted in the first place.

In response to the comment about paying too much, everyone gets wrapped around that.  Could I have saved a some money here and there...maybe, but when I look at the area the prices are somewhat around the same price (assuming they are fixed up) and the reality is that on a property in which I'm investing $38,500 dollars on, I am expected to get $650 a month in rent and cash flow somewhere around $390/month.  That's what I'm after, so I am paying for convenience and a service, and there may be others that can provide the same service, and potentially even better for cheaper, I'm on the lookout for that and will be evaluating others now that I've got my first under my belt and something to compare it to, but if at the end the work is sufficient and performs as expected then I will be happy with what I paid for the property and not really sweat over a couple grand here or there.  You have to understand right now I'm paying a premium for a service provided to me.  Clayton has overhead and his own money to make, I'm not after his portion, I'm just worrying about mine, so I'm not losing sleep on it from that standpoint (unless I get to the end and it's not good).  

At the end of the day, It's either a good deal or it's not.  If the math works out for me then it's a good deal.  Is it the best possible deal, probably not, otherwise I would have found a way to find the distressed property on the wholesale market and hired a contractor myself and spent my own time to make sure it got done right. Is it a good deal for you? I don't know, maybe it's not-I don't know your situation. But it's not for anyone else to decide what is a good deal for you but yourself.

Does this make sense?  I hope I'm not offending you Eddie, that's not my intent.  I know what I was buying when I signed the deal, I was just hoping for a bit more communication.

[Account Closed]

Morris Invest sells D class garbage to out of staters who really have no idea what they're doing or what they're getting into. This stuff is crap, it's in horrible neighborhoods, by the accounts on BP it seems that the work done is shoddy, and the on paper numbers will never be realized. Not to mention the first time a tenant trashes the property, which they will, its value will immediately go down to 1/3 to 1/2 of what the "investor" paid for it. If it was even worth that to begin with, which is a stretch in most cases.

It's mind boggling the amount of money people are dropping on this stuff. I can't even fathom working and saving up that amount of cash only to blow it on these types of properties. There's a reason that the locals aren't touching it. Most of these buyers are going to lose every penny. And I mean that literally, not just in the sense that the return will be sub-optimal. These properties will be absolutely worthless during the next downturn if they are left vacant for any amount of time or if any substantial repairs come up.

[Nate Hammond]

@Account Closed Being from Indy what would you consider a a good alternative to Morris Invest? What price point, neighborhoods, etc.?

[Account Closed]

Originally posted by @Nate Hammond:

@Account Closed Being from Indy what would you consider a a good alternative to Morris Invest? What price point, neighborhoods, etc.?

I would go to a suburb where ARVs are 80K at an absolute minimum and buy something with a 1-1.2% rent to price ratio. Won't cash flow for crap but at least it will hold some value. You're not going to do much better than that as an out of state buyer looking for a turnkey property. And you can not navigate the urban core of Indianapolis if you're not here. Great turnkey deals simply do not exist in this market. As far as providers I couldn't say as far as I am concerned they are all selling overpriced crap.

The only "great" turnkey deals are C- to D class inner city or inner ring suburban properties with ridiculously optimistic numbers that will never pan out. And more importantly when you try to get rid of the property you will realize that since you bought in the ghetto your only buyers are local investors like me who aren't going to give you a fraction of what you paid for it. Then we will flip it to some other out of state buyer for an inflated price. And the cycle repeats.

Really my first piece of advice would be to stick to your local market.

[Eddie T.]

@Andrew Buchanan A few years ago when I bought my first rental property I trusted the local specialist in that I was getting a good house and that I was not over paying. Two years later I had to sell the property at a 7k loss. 

When buying real estate one must try to below market value in these cash flow markets as prices generally do not increase and you even if you sold it for the exact same price you bought it for you would lose 10% to sales expenses.

I learned my lesson the hard way to not be hands off, you have 40k in cold hard cash at risk. You should be more involved and not be so easy going about the entire process. 

As a buy & hold investor I generally do not sell but we all must sell at some point and selling at a loss will wipe out several years of cashflow. I am speaking to you from experience 20 properties later, yes it is ok sometimes to overpay but once you are established and have a decent sized portfolio which could balance out any potential pitfalls. But when starting out that is when you are most at risk with all your eggs in one basket if this one deal turn out bad for you it could have you several thousand dollars in the whole.

But how I see things is from a more cautious point of view and not everyone will be that careful.

[Account Closed]

Originally posted by @Eddie T.:

@Andrew Buchanan A few years ago when I bought my first rental property I trusted the local specialist in that I was getting a good house and that I was not over paying. Two years later I had to sell the property at a 7k loss. 

That's getting off way easy. You did a hell of a lot better than any of these people are going to do. I saw a guy take a 30K hit a few weeks ago on a C- turnkey here in Indy. That one was probably equivalent to the mid to upper tier of the type of stuff Morris sells. It's not at all unusual.

[Jay Hinrichs]

@Nate Hammond  general rule in most mid western is not all is to be north of 800 in rent and buy top of the market not the bottom... cash flow will generally be more consistent over time and you will have the gross revenue to pay for cap ex which hits every home... bottom end of the market is really more appropriate for those that live there and self manage IE they don't have to pay mangers and they do rehab and make readies at cost.. those two items will be the difference in cash flow and cash neutral or negative is my experience of owning a couple hundred of these..  its just human nature and reality.. I mean just look at the cheapest rental properties in your area or our area .. and compare them with mid range or higher end ... which would you prefer to own and which do you think are more safe and consistent

[Summer Roberson]

Any update on this property? I have a call scheduled with them in four days and I'd love to know how you feel about your investment now that it's been a couple months! Thanks for taking the time to document this 

[Andrew Buchanan]

Latest update from 7/13 from Morris invest is that not only is the rehab done, but there is a signed lease on the property.  So the good news is that I closed on the property on 5/19 and I will be receiving my first rent check by the end of this month.  So all in all, not a bad turnaround, more a lack of customer service which seems to be due to the rapid expansion of Morris Invest.  I still am awaiting pre and post rehab photos as well as the details of the lease.

I have high hopes for cash flow on this property, and who knows, I may continue to have this type of property in my portfolio in the future, but I will be looking elsewhere to ensure that I'm getting solid investment for my money and that I'm getting better service along the way while I look to build my own team / systems for investing.

[Dario Contreras]

Hey @Tyler Jahnke! Thank you so much for sharing your experience thus far with Morris Invest, I have been listening to his podcast and viewing a few videos and was very interested.  

Any updates? would love to hear how you are doing so far, and I hope is POSITIVE!! 

[Jim Schock]

@Tyler Jahnke  Do you have any updates on how this is going now a few months in?  I spoke with them today, and they are actually doing projects in my area which has some interest.  Although they call them C areas I don't know if I would agree with that.

[Michelle D.]

Wow - that was a marathon read!  @Tyler Jahnke, thank you so much for the invaluable information you've provided which I'm sure helped in keeping Morris invest accountable as well as helped educate me!  Now "let the cash flow"!

[Tyler Jahnke]

Hey BiggerPockets!

Got another super quick and boring update for you. Hoping these updates become very very very routine! I officially received my fourth rental check deposited to my account today. Details:

$750 gross rent - $75 management fee = $675 in my account.

No expenses for the month of July.

-Tyler

[Ayodeji Kuponiyi]

@Tyler Jahnke That's awesome thanks for the update. 

[Dino Cardamone]

Wow, that's great @Tyler Jahnke.  Looks like your new rental is doing well for you!  Thanks for the update.

[Tyler Jahnke]

Thank you @Ayodeji Kuponiyi !

-Tyler

[Matt R.]

Originally posted by @Tyler Jahnke:

Thank you @Ayodeji Kuponiyi !

-Tyler

 We all hope this becomes the best investment of all time. For some others, a future sewer line, roof replacement  and a couple bad turnovers wipes out many years of cash flow. Investors should be realistic when investing for cash flow in known cash flow only locations. The only thing that saved many in the past from the above expenses was apprecation of values and rents. 

[Mark Whitted]

@Marr R. Morris SUPPOSEDLY replaces the roof and all of the mechanicals so that you SHOULDN'T have any of those issues for many years. If you have to replace a water heater or furnace in 2-3-5 years it SHOULD still be under manufacturer's warranty. I will be verifying that this is the case before I buy.

[Nate Hicks]

Since it's been months are there any updates?

[Nate Hicks]

Disregard my last and thanks for the update info.

[Jason Zhang]

@Tyler Jahnke Thank you for much for starting this thread! Happy investing. It is enormously helpful. 

[Jean-Thierry Aleman]

Great Post  @Tyler Jahnke.    Would you do it all over again or better question.... Will you continue to invest with Morris?

[Bobby N.]

Thank you @Tyler Jahnke, I had been debating to try Morris Invest. You have taken us on a journey.