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!

[Glenn Paulson]

@Edith TenBroek...When you next communicate with Clayton, try to dig down on why communication seems to be a common failure in dealing with his team. Wondering if his retirement from TV will help with this issue. I'm still on the fence with two hurdles.

1. Actual location within Indy. On his videos and google maps, the area looks like C Class neighborhood. On crime data websites, it leans to D Class.

2. Communication issues (reported by others)

Thanks

Glenn

[Edith TenBroek]

If I get on a call I definitely will @Glenn Paulson.  Another thing I noted - if you listen to his podcasts and video casts, he says they DON'T give definite timelines for rehab.  It's very weather dependent for outside work.  Plus, if they run into something unexpected (rotting floor boards under the flooring for example) it can take longer to get things done.  They aim to get everything finished within 2 months, but they don't guarantee the timeline.  That may be a misunderstanding (or overpromising) with some of his staff. Anyone who's done a rehab knows it ALWAYS takes longer than you thing it will.  Patience is key.  He also sells properties that he has already rehabbed.  That may be the way to go if he has any available.

I watched the video on how he makes his money.  He marks the property up when he sells it.  Similar to wholesaling, but he rehabs them too.  He's not associated with the property management.  He just makes referrals.  You don't have to go with that guy.  You can have anyone manage it, or even manage it yourself if you live in the area.

How does he get the houses so cheaply? He buys bulk lots of houses at tax auctions, buys from failed hedge funds, picks up a whole slew of houses for 1 million, and sorts it out afterwards.  His price per house is pretty low doing it this way.

As to how he can do refurbs so cheaply, his construction crew is on staff.  He buys waterheaters 10 at a time.  He uses the same paint, flooring, cabinetry, fixtures etc in all of his rehabs.  It's cheaper to buy all this in bulk, so yes, he CAN do a refurb much cheaper than the guy doing one house and going to Home Depot for supplies.

They are a great fit for someone who wants to own rental property, but remain hands off.  If you are calling and checking in every few days about the rehab, you aren't helping... you are just making more work for his staff.  

This is just what I have gleaned from watching his show and listening to his podcasts.  

If anyone out there has actually BOUGHT a house from Morris Invest and had a BAD experience, I would love to hear about it.  I haven't come across any in my research so far.

Edie

[Edith TenBroek]

Just another quick note.  It looks like he has added staff!  Morris Invest has phone call slots available TOMORROW!  So no more long waits.  Just an FYI for anyone interested.

Edie

[Lillian Leigh]

Thank you for the info, we are considering investing with Morris Invest however still in the beginning phases of putting our business together. Good luck and keep us posted!

[Benjamin Centeio]

@Tyler Jahnke Great post and analysis, been talking with Morris Invest myself and having some of the same questions when it comes to response speed etc. I am curious as to the state of the new turnkey you are working on. Maybe you can give some comparison between your two experiences?

[Cameron Davis]

@Tyler Jahnke

I still have the very simple question... What was your total cost to purchase and rehab? I read thru this complete thread.

And now a second question... You aren't going to use this company again for your second acquisition? It doesn't sound like you are, which I think gives the answer many people are looking for here... no need to go thru a company like this.

[Tyler Jahnke]

Hey BiggerPockets!

Here's another quick update for you. I officially received my sixth rental check deposited to my account last week: $750 gross rent - $75 management fee = $675 in my account.

No expenses or repairs yet (*knock on wood*). I've built up a decent little reserve for any costs that might pop up unexpectedly. And property taxes are due in a little over a month.

Also - I can't believe its almost been a year since I closed on this property!

-Tyler

[Steven Israel]

Did u invest in a 2nd property with MI?

[Roland Brown]

Tyler Jahnke any update on this project? I’ll be ready to in 3 months for my first set of purchases. I’d like to see how it’s been since you posted here.

[David S.]

@Roland Brown Looks like it was updated 3 days ago...He just cruised through 6 months of collecting rents without any unanticipated expenses.

[Jay Hinrichs]

Originally posted by @David S.:

@Roland Brown Looks like it was updated 3 days ago...He just cruised through 6 months of collecting rents without any unanticipated expenses.

basing an investing decision on the first 6 months of history is going to get a lot of people into some major heartache.. this is why professional that buy multi always want 2 to 3 years of tax returns to get a REAL understanding of how a property is functioning and you have some history to average out your highs  ( like right now) and your lows  ( when you have move out and turn over)

[Roland Brown]

oh, i clearly missed the update in my scrolling. Glad to hear it started out well. 

I agree with you@Jay Hinrichs that short term view is a quick way to sink a boat. I did that on my last business, lost my shirt and learned the hard lesson. Fixed now it’s time to start again. 

Good news every mistake is a chance to learn, bad news is some lessons last longer than others. 

[Adam Ulery]

Hi @Tyler Jahnke, it's been 9 months since the last post and I'm curious if you can share any updates with us. No matter how it went, there are tons of valuable lessons others can learn from your experience. I hope things went well for you and would like to hear anything you're willing to share. Thanks!

[Allen Harris]

Hey, @Adam Ulery.  Tyler has updated several times over the past several months. The most recent was six days ago. This is a huge thread, so make sure you’re seeing all the pages. It’s currently about 19 pages. 

Originally posted by @Adam Ulery:

Hi @Tyler Jahnke, it's been 9 months since the last post and I'm curious if you can share any updates with us. No matter how it went, there are tons of valuable lessons others can learn from your experience. I hope things went well for you and would like to hear anything you're willing to share. Thanks!

[Hugh Nelson]

Hey @Tyler Jahnke - can you provide an update on your Morris Invest project?  I like Clayton Morris, too, and got as far as talking to Larry.  I told him I was interested in buying a number of investment properties within the space of a few months.  My experience was similar to what I’ve seen in this thread.  He promised to send me properties to review, but never did.  When I expressed interest in one of the houses he mentioned to me, it was sold already.  I hit them up through their Twitter feed, and they said they had lots of properties.  But they never did send me more.  I was disappointed at the small amount of information they were willing to share about the property.  I finally decided to look elsewhere.  FWIW, I’ve had similar experience in a hot RE market with bigger providers like Jason Hartman.  

[Brian M.]

@Hugh Nelson

Tyler usually updates once month when he receives his rent payment.  If you scroll back, you will see his September update.  He will probably update again at the end of October.  So far, it seems things have gone fairly smoothly for the past 6 months or so.

[Tyler Jahnke]

Hey BP Peeps!

Another quick and boring update for you. I officially received my seventh rental check deposited to my account this week: $750 gross rent - $75 management fee = $675 in my account.

No maintenance expenses yet (*knock on wood*), but I did just pay my second half property taxes which cost me $600. But, I still have decent cash reserve built up and I've been taking monthly cash flow.

-Tyler

[Johnny Situ]

Thanks @Tyler Jahnke did you pay insurance and taxes through your escrow account? What's the net return % look like?

[Diane G.]

So, after property tax and reserve, lets say net cash flow is $5000... That is about enough to cover one trip to Memphis, and maybe one tenant turn over.... Say you go over once every 2 years, and one tenant turn over every 2 years, annual net profit drops to $2500....

With $2500 cash flow per year, and almost no appreciation potential, I am STILL not seeing how this is a good investment....

Not try to be mean, but it is an open discussion....

[Account Closed]

Tyler, did you or have a discussion about an inspection on property and an appraisal
Thanks
Rob

[John Fortes]

Hi @Tyler Jahnke congratulations on taking the plunge with Morris Invest's. Did you ever get any pre and post pics of the property you purchased? Also, how has everything gone as far as tenants, property management, ect. Anything you can fill us in on? 

[Tracy D. Garrett-Numa]

Hi Tyler,

Congrats on your accomplishment.  I have been considering investing with Morris Invest as well and have followed your updates but there was a cap in my reading from Dec. 2016 until 3 days ago.  I wanted to know based on your experience and rate of return on money, can you say it was a good investment and have you invested in any more properties with Morris Investment or will you?  others are saying based on your expenses and rent that it was not a good investment, what do you think?

Thanks,

Tracy

[Cory Langel]

I see you getting a lot of criticism on the numbers. By my math your are getting an ROI of about 11%. That's great.

[Cameron Davis]

Originally posted by @Cory Langel:

I see you getting a lot of criticism on the numbers. By my math your are getting an ROI of about 11%. That's great.

@Tyler Jahnke won't tell us how much how much was spent on rehab. Therefore, the math can't be done. I don't know why he won't answer this simple question.

[Allen Harris]

@Tyler Jahnke won't tell us how much how much was spent on rehab. Therefore, the math can't be done. I don't know why he won't answer this simple question.

Tyler's original post from last year says it was $9,000 in rehab on the property he selected. It is on his time line marked December 5th in that first post of this thread. I am not sure what the mystery is. The price Morris gives you up front is the price you pay. If the rehab goes over, Morris eats the cost overruns. At least, that is what they promote and what others have reported. I have not bought a property from them.