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!

[Mike German]

Hey @Tyler Jahnke, I'm late to the game, too but wanted to see how things are going 4 months later?  I'm a big fan of the info on Morris Invest's podcast but skeptical as well.  Thanks in advance!

[Mike German]

Hey @Tyler Jahnke, I'm late to the game, too but wanted to see how things are going 4 months later?  I'm a big fan of the info on Morris Invest's podcast but skeptical as well.  Thanks in advance!

[Daniel P.]

Great thread. I reached out to this company earlier this year and didn't get a great feeling from them. My POC was Larry as well ironically and like others stated communication could have been better. I opted not to pursue this when I couldn't get good pictures. I only got 1 pic (a bad one at that) and was unable to get anything else. I think I was too much work for them because I had lots of questions and concerns and I never heard back from Larry after trying to get the information I was requesting. 

[David Rice]

@Bea Cortis how was your experience with Roofstock?

[Roger S. Solema]

@Tyler Jahnke

Awesome post, man! 

I recently had my first phone call with Clayton. I'll definitely try to keep a good record of how things go.

Let us know how things are going!

[Tyler Jahnke]

Hello BiggerPockets,

Just a super quick update as things are running smooth now and hopefully will continue for the foreseeable future (*knock on wood*). It's only been two months since I got a renter in, but I officially got my second rental check deposited to my account. Details:

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

No repair or maintenance costs for the month of May.

-Tyler

[Dino Cardamone]

Wow @Tyler Jahnke, $675.00 in your account?  That's a pretty profitable income!  Good for you.

[Douglas Ladendorf]

@Tyler Jahnke I'll throw my thanks in as well for posting your adventures. It sounds like you are where you expected to be, and I'm looking forward to hearing additional updates. 

I'm a long time listener to This Week In Tech (TWiT) and have often heard Natalie and Clayton as guests from the tech side of their lives. I found Clayton's podcast after it was mentioned there, and started listening. He is a savvy marketer, generating a great deal of interest in a short time. It sounds like the operations have struggled to keep up though, and the business itself is remote from the properties which must have it's complications. I think part of his success is breaking down a complex subject (REI) to one number - your FREEDOM number. It's a "you invest in real estate, but we'll handle the details" approach that I'm sure many find appealing, especially when they are busy or live in a challenging market. I'll admit I was tempted to call, but the lack of any leverage bothered me. Instead, I started going to my local REIA meetings for networking and education, and I highly recommend this for anyone new to real estate investing. You will gain exposure to the many ways people make investing work, and find the approach that works for you.

[Brian Fehrle]

@Tyler Jahnke Thank you so much for this thread, I'm continually following since I found it last week. I read the whole thing, and am interested in continuing updates. I have about $40K myself that I want to invest and get generating money, but I'm currently unable to get a home loan (max leverage at the moment), so looking at these kinds of properties to invest that cash in. 

You're providing a wonderful service to the community. 

[Kevin Estey]

I've been reading the progress on this thread for sometime, and thought it worth adding my 2 cents. I have purchased multiple SFR properties from Morris Invest over the last 18 months, and so far have had consistent cash flow, and minimal (no) maintenance costs thus far. I'm venturing into multi-family purchases through them now, and we will see how that goes.

I appreciate @Tyler Jahnke documenting the realities of his experience with them, instead of speculating on what "could be" based on horror stories heard from someone who has never actually invested with the company.

I can attest to the communication leaving something to be desired, and I can tell the company is working on that aspect, but the true end goal of consistent cashflow seems to live up to it's promise so far, 18 months on. And the type of returns Tyler is just starting to see, I have seen consistently, even with rent increases on resigns (not always a guarantee, but a possibility, and icing on the cake!)

I am willing to find down the road that maybe the short view is bright, but the long view is a bit more grey.  And if that is the case, I will address what needs addressing at that time (future maintenance, tenant turnovers, etc).  But all of these potential future pitfalls are things you will find in ALL real estate, and you can never predict, so you just go with instinct, experience, research, and a readiness to roll with the thrilling ups and downs of it all.

[Nicholas M.]

Originally posted by @Kevin Estey:

I've been reading the progress on this thread for sometime, and thought it worth adding my 2 cents. I have purchased multiple SFR properties from Morris Invest over the last 18 months, and so far have had consistent cash flow, and minimal (no) maintenance costs thus far. I'm venturing into multi-family purchases through them now, and we will see how that goes.

I appreciate @Tyler Jahnke documenting the realities of his experience with them, instead of speculating on what "could be" based on horror stories heard from someone who has never actually invested with the company.

I can attest to the communication leaving something to be desired, and I can tell the company is working on that aspect, but the true end goal of consistent cashflow seems to live up to it's promise so far, 18 months on. And the type of returns Tyler is just starting to see, I have seen consistently, even with rent increases on resigns (not always a guarantee, but a possibility, and icing on the cake!)

I am willing to find down the road that maybe the short view is bright, but the long view is a bit more grey.  And if that is the case, I will address what needs addressing at that time (future maintenance, tenant turnovers, etc).  But all of these potential future pitfalls are things you will find in ALL real estate, and you can never predict, so you just go with instinct, experience, research, and a readiness to roll with the thrilling ups and downs of it all.

 Funny enough I started listening to the Morris Invest podcasts from the beginning and just today happened upon the episode featuring @Kevin Estey. I am really happy to see your comments and learn that this has worked out for you -- and I am happy that this is working out so far for @Tyler Jahnke. 

It is very easy to claim to be an expert and then from that soapbox proclaim that someone else's successes are bogus, false promises, etc. (ahem, pointing at one @jay something-or-other in particular); the more valuable commentary, however, is the candid feedback about the risks taken with Morris Invest and whether the risk has reaped the reward -- or not. 

If we're being fair -- and we ought to be, since @Clayton Morris has been raked over the coals in many threads on here by a lot of self-proclaimed REI gurus who, frankly, have a glaring vested interest in bashing their competition -- from the legitimate transactions undertaken with Morris Invest, the feedback on these threads weighs HEAVILY in favor of the risks reaping the promised rewards.

And on another note, I've seen a number of people refer to some lower-income areas where many of the subject properties are located as "ghettos" or "the hood," both of which are unnecessarily charged descriptions, especially when accompanied with other comments denigrating the character of the people who make their homes in these places. Next time you think to focus on how "hood" one of these neighborhoods is, consider that the likelihood for criminals to be your neighbors in A-class areas is ever increasing, what with the sharp increase in cybercrime, Medicaid fraud, tax-evasion, and other white-collar offenses that seem to be the stock and trade of too many "elite" professionals nowadays.

[Ann Burrows]

I have read every post in this thread and appreciate reading Jay's ongoing  experience! I am in the process of buying a property in Jacksonville through MI that should close this week. I have to admit that this was a roller coaster read as I have wondered if we have made a big mistake.  I particularly appreciate Nicholas M's comments as I also felt there was a lot of intentional bashing from competitors. And, agree that it isn't fair or productive to classify all lower income neighborhoods as ghetto. There are a lot of families that need a place to live that can't afford an A class neighborhoods.

It remains to be seen if this turns out to be a good investment but you never get anywhere in life if you aren't willing to take risks.

[Vivek Khoche]

@Daniel P. - Consider yourself lucky. I don't operate in the market where Morris invest operates but with little research you should be able to find many distressed properties of the brave investors.

Good Luck Investing

Vivek

[Vivek Khoche]

@Ann Burrows - Time will confirm if it's not a mistake. There is somethings called decision under certainty and risk. Try selling the same property and see what you get.

"Education is what you get by learning from others. Experience is what you get by not learning from others."

Good Luck Investing

Vivek

[Shawn Ackerman]

@Tyler Jahnke congrats on getting things moving.  on to the next one as they say!!!

[Daniel P.]

Congrats! Glad to see you have the $$ coming in! 

[Brent Altman]

@Brian Fehrle - if you have $40k to invest, you might consider some leverage and buying a property of a higher quality. You can still get 4.5% on a 30 year fixed mortgage with 25% down. You could take $30k plus closing and buy a $120k property that cashflows nicely, and still have some cash left over as a cushion. If you haven't invested before, the ROI might be lower than the $40k house, but your headaches will also be lower.

[Nick Howard]

mod, please do not post, just realized there was a billion more pages to read (noob move)

[Tyler Jahnke]

Hey BP!

Got another super quick and boring update for you.  Hopefully these monthly updates will continue to be pretty vanilla for the foreseeable future! I officially received my third rental check deposited to my account today. Details:

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

After three months I've also been able to accumulate a little expense cushion, which is always comforting. Being super conservative, I've set aside $1000+ for future expenses and taken the remaining as cash flow.

No repair or maintenance expenses for the month of June.

-Tyler

[Ayodeji Kuponiyi]

@Tyler Jahnke thanks for the update 

[Diane G.]

@Tyler Jahnke

who pays for property tax, insurance, and utility?

[Tyler Jahnke]

Hi @Diane G. - I pay property tax and insurance as the landlord. 

My tenant pays utilities. 

-Tyler

[Diane G.]

@Tyler Jahnke

OK, so lets say property tax and insurance is $75 a month, so your net profit per month is $600, annual profit of $7200..... Good job until:

1. a tenant turn over wipes out half of your annual profit

2. a trip over wipes out half the annual profit

3. a AC replacement wipes out half the profit

so on.......

[Diane G.]

@Tyler Jahnke

In the meantime, you look around and your friends who sucked up the pain and bought in Bay Area are sitting on $200K equity after 5 years....

[Bob E.]

@Tyler Jahnke  glad things are working out for you.  Stick with it and you will have a nice portfolio in no time.  These properties do best when you hold a small portfolio of them.  At some point you can start turning them into seller financed deals and eliminate the tax, insurance, and maintenance expenses.

In 10 years California property may double, or not, but you can easily double the number of houses that you own in these markets.