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!

[Ray Sizzum]

Originally posted by @Liliana Ruano:

Hi everyone, typically I am not embarrassed to ask questions when I don't know or am unsure of something, but in this case, I am embarrassed.  As mentioned before I have signed up with another management company, but my question is, considering the situation they are in, what is would be the proper method of informing Oceanpointe that I no longer need/want their services?  I assume to follow the agreementt?

Thank you!!

 You could call their non existent phone number or visit their non existent office or web site to notify them.

[Ray Sizzum]

Originally posted by @Tyler Jahnke:

Hi @Will Zena - I had a very brief email exchange with Clayton and he stated there was nothing to worry about. He attached a screen shot of the still active license. With that, I'll continue to use them as my PM.

-Tyler

You should also ask him why there's still a lockbox on the front door of your property and the neighbors say it's been abandoned for months.

[Nate Hammond]

@Ray Sizzum

Can you please elaborate on your posts?

[Ray Sizzum]

Originally posted by @Nate Hammond:

@Ray Sizzum

Can you please elaborate on your posts?

What's to elaborate?

[Nate Hammond]

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

[Ray Sizzum]

Originally posted by @Nate Hammond:

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

I talked to the neighbors.

Property also has a lockbox on it and was pitch black when I drove by after dark.

Guess the doctors and nurses that live there were all working night shift.

[Steven Israel]

I can't understand why MI doesn't address these concerns people have

[Jay Hinrichs]

Originally posted by @Nate Hammond:

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

 your an appraiser!  and so I will give you some context.. I have been funding A and D deals there since 2004.. There being Indianapolis I go there 4 times or more a year.. I have business relations with a few of the bigger wholesalers and PM's I can assure you the feedback from investors about vacant and non rehab houses is accurate.. of course its not every house they ever sold but for those unfortunate enough to be in that situation its devastating..

and since I have been funding turn key outfits since 2002 I have seen this play before.. out of state clients hey we will just pay the rent we don't want any bad press etc etc.. Now I can't for sure say whats happening is this.. its hearsay but those that have gotten on here and talked about it as actual owners I think you can take them as credible and why would they not tell the truth.. And you take Tyler the author of one of the longest threads in BP history if you were going to pay rent on a vacant house don't you think that would be the one you choose.

then there is the other thread were the guy put up the U tube video only to take it down Because morris contacted him and said he would buy him out or fix it.. to me its as I have stated these guys are caught and they want to put the genie back in the bottle. but at the end of the day what they have done is very wrong..

having done this business all my life the BEST imperical evidence of occupancy is the neighbors hands down.

Here is another company that came to me looking for funding in 2001 for KC and Indy  I told them you cannot buy cheapest real estate in the city and pay rents on vacant units.. it created a huge Ponzi scheme

https://www.sec.gov/litigation/litreleases/2016/lr23451.htm   you will see post on BP from Clatfelter as well when they were still trying to sell stuff.

but be that as it may.. its really up to those that have suffered loss's to either do nothing or its very simple to file a complaint on line it takes 5 minutes and let the state decide if this business practice is acceptable.

 

[Jay Hinrichs]

Originally posted by @Ray Sizzum:

Originally posted by @Nate Hammond:

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

I talked to the neighbors.

Property also has a lockbox on it and was pitch black when I drove by after dark.

Guess the doctors and nurses that live there were all working night shift.

Ray I think we may all be missing something here since these are doctors renting these houses as Morris proclaims in his pod casts.. they probably signed a 1 year lease  and even though they moved they still are paying on a vacant house.. maybe that's whats happening, you know tenants in the low end always honor their leases even  if they up and leave in the night they will continue to pay until the end of the lease.. right ???

[Joseph Suarez]

@Ray Sizzum There are several people who have invested with MI and have said that they were receiving rents on their vacant property so that is not surprising, but I was under the impression that Tyler had actually seen the property after MI addressed all the rehab issues. If I was in his shoes I would hop on a plane and see what the hell is going on over there. I just don't understand how more people don't post reviews on their experience with MI whether good or bad, or even comment on his YouTube channel. The people commenting on his videos are tripping over themselves for the opportunity to invest with MI.

[Ray Sizzum]

Originally posted by @Jay Hinrichs:

Originally posted by @Ray Sizzum:

Originally posted by @Nate Hammond:

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

I talked to the neighbors.

Property also has a lockbox on it and was pitch black when I drove by after dark.

Guess the doctors and nurses that live there were all working night shift.

Ray I think we may all be missing something here since these are doctors renting these houses as Morris proclaims in his pod casts.. they probably signed a 1 year lease  and even though they moved they still are paying on a vacant house.. maybe that's whats happening, you know tenants in the low end always honor their leases even  if they up and leave in the night they will continue to pay until the end of the lease.. right ???

Yeah, especially in Martindale-Brightwood.

Now A class tenants on the other hand, not the type of people I want to deal with. 

[Ray Sizzum]

Originally posted by @Joseph Suarez:

@Ray Sizzum There are several people who have invested with MI and have said that they were receiving rents on their vacant property so that is not surprising, but I was under the impression that Tyler had actually seen the property after MI addressed all the rehab issues. If I was in his shoes I would hop on a plane and see what the hell is going on over there. I just don't understand how more people don't post reviews on their experience with MI whether good or bad, or even comment on his YouTube channel. The people commenting on his videos are tripping over themselves for the opportunity to invest with MI.

That's because they're suckers.

What Tyler should do is offload his property to a greater fool before the current "passive cash flow" investing mania ends.

[Matt K.]

Originally posted by @Jay Hinrichs:

Originally posted by @Ray Sizzum:

Originally posted by @Nate Hammond:

@Ray Sizzum

You went by his property? Talked to the neighbors? Talked to Tyler? You just came in saying all this stuff with no context. Thanks

I talked to the neighbors.

Property also has a lockbox on it and was pitch black when I drove by after dark.

Guess the doctors and nurses that live there were all working night shift.

Ray I think we may all be missing something here since these are doctors renting these houses as Morris proclaims in his pod casts.. they probably signed a 1 year lease  and even though they moved they still are paying on a vacant house.. maybe that's whats happening, you know tenants in the low end always honor their leases even  if they up and leave in the night they will continue to pay until the end of the lease.. right ???

 By moved you mean upgraded to his new construction of garage looking builds right?

[Liliana Ruano]

Originally posted by @Ray Sizzum:

Originally posted by @Liliana Ruano:

Hi everyone, typically I am not embarrassed to ask questions when I don't know or am unsure of something, but in this case, I am embarrassed.  As mentioned before I have signed up with another management company, but my question is, considering the situation they are in, what is would be the proper method of informing Oceanpointe that I no longer need/want their services?  I assume to follow the agreementt?

Thank you!!

 You could call their non existent phone number or visit their non existent office or web site to notify them.

 Thank you for your suggestions Ray, this has been taken care off. 

[Michael Gansberg]

I’ve enjoyed reading this thread for quite awhile- I think I weighed in somewhat early on. It’s pretty clear to me that MI is running a Ponzi scheme.

MI takes a house that’s worth pennies, sells it to some out-of-state sucker for $60k or so, then uses the difference between what MI paid and the sales price(their ‘profit?’) to pay out monthly rent to prior investors. Why should MI fix up these houses and get actual tenants? That would require SO much work!

😬🤫🤥

Ponzi schemes like this never end well. Eventually, the supply of essentially free house and/or suckers runs out, or law enforcement catches on, or some combination of those factors. This story will end no differently- with lengthy prison terms and multiple bankruptcies.

Happy Friday! Xo,

Michael 

[Jay Hinrichs]

Originally posted by @Michael Gansberg:

I’ve enjoyed reading this thread for quite awhile- I think I weighed in somewhat early on. It’s pretty clear to me that MI is running a Ponzi scheme.

MI takes a house that’s worth pennies, sells it to some out-of-state sucker for $60k or so, then uses the difference between what MI paid and the sales price(their ‘profit?’) to pay out monthly rent to prior investors. Why should MI fix up these houses and get actual tenants? That would require SO much work!

😬🤫🤥

Ponzi schemes like this never end well. Eventually, the supply of essentially free house and/or suckers runs out, or law enforcement catches on, or some combination of those factors. This story will end no differently- with lengthy prison terms and multiple bankruptcies.

Happy Friday! Xo,

Michael 

 here is how they end.. these guys came into my office in 2011 looking for me to fund their buy and rehab ( as that is my day job and I have been doing it in INdy since 2004

https://www.sec.gov/litigation/litreleases/2016/lr23451.htm    same thing buy hood rats sell them that they are cash flow .. guarantee rents.. tell all sorts of marketing tails.. right now I have to agree with you.. people with vacant houses are getting money paid to them.. they sit in another state unaware of the danger that their asset is in..

NOt sure were all the doctors and nurses are that are described on the MOrris' pod cast went to though ?

 

[Will Zena]

I have listened to the podcast for a long time. I have spoken and emailed with Clayton. I even left positive reviews and thanks him for his podcast because it motivated me to purchase my first rental property (from someone else). I am also halfway towards buying my 2nd property.  But there are too many red flags for me to invest with their company. 

However, help me understand. You have a long great career on FOX and friends. You have your own rental properties working for you as well.  Why quit your job and start a Ponzi scheme?  It doesn't make any sense.

[Jay Hinrichs]

Originally posted by @Will Zena:

I have listened to the podcast for a long time. I have spoken and emailed with Clayton. I even left positive reviews and thanks him for his podcast because it motivated me to purchase my first rental property (from someone else). I am also halfway towards buying my 2nd property.  But there are too many red flags for me to invest with their company. 

However, help me understand. You have a long great career on FOX and friends. You have your own rental properties working for you as well.  Why quit your job and start a Ponzi scheme?  It doesn't make any sense.

 simple it pays better than TV.... and who really knows the extent of anyone's portfolio.

its just being a TV Guru that's all it is .. he could have went on the seminar how to circuit just as easy..

remember 5k a home to him with no risk.. then he can throw Oceanpointe under the bus.. and obviously they are totally inept.. based on BP feedback.. its a cluster of epic proportions.   

This is not the first company to learn the hard way that these type of assets are very very risky and tough.. but when you represent them as safe secure easier to manage than A class or strong B that's were you have to draw the line of what is truth and what is just saying what ever you can to sell something..

Most of the Turnkey companies that have been at this for any number of years will be the first to tell you they started in these areas and quickly learned they are not sustainable.. and moved up in asset class.. so they could continue to have a viable business.

[Will Zena]

@Jay Hinrichs yeah it makes sense. get what you can and structure you company in a way that your not liable. then move on.

[Jay Hinrichs]

Originally posted by @Will Zena:

@Jay Hinrichs yeah it makes sense. get what you can and structure you company in a way that your not liable. then move on.

 Yeah well the not being liable has left the corral... both those guys are liable.. just depends on who wants to stick up for themselves.. most of these companies that get nailed you will see on American greed and other shows they get nailed for wire fraud.. now many think wire fraud is just stealing money its NOT.. its also sending false statements over the internet or websites or marketing.. there is a lot that goes into wire fraud.. whether that's the case here who knows.  it would be up to a trier of fact..

[Steve BenJacob]

Hello all. I purchased a house with MI November of 2017. I contacted the transaction coordinator by email two weeks ago about the status of the rehab.  I was informed that rehab was complete and as soon as she was sent the pictures of the rehab she would email them to me.  I was also told my property was being prepared to market for tenants. I was feeling good about this whole idea of out of state passive income until I read the last few pages of this thread.  Please excuse my hijacking this thread.  Shall I start one of my own or continue on this one?  Thanks all!

[Jay Hinrichs]

Originally posted by @Steve BenJacob:

Hello all. I purchased a house with MI November of 2017. I contacted the transaction coordinator by email two weeks ago about the status of the rehab.  I was informed that rehab was complete and as soon as she was sent the pictures of the rehab she would email them to me.  I was also told my property was being prepared to market for tenants. I was feeling good about this whole idea of out of state passive income until I read the last few pages of this thread.  Please excuse my hijacking this thread.  Shall I start one of my own or continue on this one?  Thanks all!

you would be well served to have independent eyes on the property I would order and pay for a home inspection.. first and foremost.. if they balk then you know. 

[Joseph Suarez]

@Steve BenJacob

Did you go to see the property or have someone on the ground, not with MI, view the property before you purchased? If you are unable to I would try to find someone local who can view the property just to make sure that what they are telling you about the rehab being complete accurate. You could also start a thread on your experience with MI thus far, it would definitely help other investors looking for more information on MI, as if the stories that have come to light here aren't enough of a red flag.

[Ray Sizzum]

Originally posted by @Steve BenJacob:

Hello all. I purchased a house with MI November of 2017. I contacted the transaction coordinator by email two weeks ago about the status of the rehab.  I was informed that rehab was complete and as soon as she was sent the pictures of the rehab she would email them to me.  I was also told my property was being prepared to market for tenants. I was feeling good about this whole idea of out of state passive income until I read the last few pages of this thread.  Please excuse my hijacking this thread.  Shall I start one of my own or continue on this one?  Thanks all!

 You're screwed.

[Steve BenJacob]

Originally posted by @Jay Hinrichs:

Originally posted by @Steve BenJacob:

Hello all. I purchased a house with MI November of 2017. I contacted the transaction coordinator by email two weeks ago about the status of the rehab.  I was informed that rehab was complete and as soon as she was sent the pictures of the rehab she would email them to me.  I was also told my property was being prepared to market for tenants. I was feeling good about this whole idea of out of state passive income until I read the last few pages of this thread.  Please excuse my hijacking this thread.  Shall I start one of my own or continue on this one?  Thanks all!

you would be well served to have independent eyes on the property I would order and pay for a home inspection.. first and foremost.. if they balk then you know. 

Great advice!  Thanks!