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!

[Steve BenJacob]

Originally posted by @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.

Im getting that feeling.  But someone stated earlier, why would a well known TV personality involve himself with shady dealings?  Doesn't make any sense!  

[Will Zena]

@Steve BenJacob I wrote that post just trying to think of all angles. But I don't own a property with them. If I did I would definitely get an inspection done. 

Matter of fact at this point I would have flown down to check things myself. There is too much negative I have seen in this post and others. I couldn't take such a gamble.

[Ray Sizzum]

Originally posted by @Steve BenJacob:

Originally posted by @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.

Im getting that feeling.  But someone stated earlier, why would a well known TV personality involve himself with shady dealings?  Doesn't make any sense!  

 Money. Lots of money.

[Brian Fehrle]

There seems to be several well experienced investors in here that are pointing out red flags.

Here's a question: If not MI, what else shall we look into? I think the reason many of us are following this thread is to determine if it's a good company to go with, and if it's not (not really looking like it), then where else shall we go?

What are signs of good Turn Key providers? What kinds of guarantees should we look for? What precautions should be taken to make sure it isn't some horrible scheme, or gross incompetence behind a company we chose to go with.

We understand that Turn Key isn't the best way to go, but for someone like myself, I have about 1 hour every two weeks to look into this kind of stuff, but I want to put some money into Buy and Hold real estate. So I consider it worth it, assuming it goes smoothly with a good company. 

[Patrick Shawn Faherty]

Originally posted by @Brian Fehrle:

There seems to be several well experienced investors in here that are pointing out red flags.

Here's a question: If not MI, what else shall we look into? I think the reason many of us are following this thread is to determine if it's a good company to go with, and if it's not (not really looking like it), then where else shall we go?

What are signs of good Turn Key providers? What kinds of guarantees should we look for? What precautions should be taken to make sure it isn't some horrible scheme, or gross incompetence behind a company we chose to go with.

We understand that Turn Key isn't the best way to go, but for someone like myself, I have about 1 hour every two weeks to look into this kind of stuff, but I want to put some money into Buy and Hold real estate. So I consider it worth it, assuming it goes smoothly with a good company. 

 I sent you a PM. 

[Mark Whitted]

@Patrick Shawn Faherty Could you please share with the group?

[Mike D'Arrigo]

@Patrick Shawn Faherty there's certainly enough feedback on this forum that anyone should be able to make an informed decision about MI, When evaluating any turn key companies, there are the things one should look for.

In general, the ones to avoid are the ones that:

• Don't allow financing or a finance contingency (it can be a good indication they are selling above market value)
• Don't allow for your own independent property inspection
• Are not realistic with their pro forma's (i.e. they don't include vacancy or maintenance projections or use unrealistically low vacancy factors)
• Require you to pay for any renovation upfront
• Sell only in cheap. low end neighborhoods
• Don't accurately represent the neighborhood/property classification
• Don't have consistent rehab standards for all properties
• Don't provide a scope of work for the property
• Can't provide references of repeat investors
• Require you to close before a tenant is in place

[Mike Malfitani]

Wow the last several pages on this thread took a turn for the worse and it seems Tyler isn't posting anymore...

[Tyler Jahnke]

Hello BP Nation! I am back!

WOW...I've had a crazy 2 months. And after 5 straight weeks of traveling for work, I'm officially back and sleeping in my own bed and it's glorious. It's the little things, right??

Now, on to my real estate journey and My First Property purchased through Morris Invest.

I've got TWO massive updates for you:

1. Good News

2. Bad News

What do you want to hear first?

[Brent M.]

@Tyler Jahnke

Tyler let's hear the GOO-AAD news!

There can't be good without bad, and bad without good :-)

[Victor H nieves]

 HA...@Tyler Jahnke ALLLL the news!

[Account Closed]

oh man, the suspense.  Good news first.

[Tyler Jahnke]

hahaha @Brent M. I like it...GOO-AAD news.

-Tyler

[Kieran Mazzola]

@Tyler Jahnke.  Bad news first, assuming that we still get to hear the good...

[Diane G.]

Wellwell

[Diane G.]

Ok, the bad news is the old tenant had to be evicated... the good news is a new Tenant has been found and moved in....

My guess

[Tyler Jahnke]

Hey BP!

I’m going to start with the GOOD NEWS, because it’s nothing crazy and will get us set up with some positives. So here we go:

GOOD NEWS

-I shopped around for insurance on this property and got a MUCH BETTER rate of $540 per year. My previous insurance cost me $722!! That’s 25% in savings! Lesson learned here: shop around and get multiple quotes. Early on, I was too eager and just purchased through the Morris Invest referral. In hindsight, it looks like they could be marking up insurance to out-of-state investors.

-I booked a trip to Columbia with my girlfriend and we’ll be hanging out in Bogota and Medellin. I love to travel and have visited 20+ countries. Long shot, but anyone going to be out there in May for a little BP meetup? Any recommendations while we’re out there?

-I closed on my SECOND property last week. This one was NOT purchased through Morris Invest. I found it on my own through the help of an agent I met in Indy last year. The original asking price was over $100K, but I got it for $86K. It’s only a 2 Bed/1 Bath, but it’s 1,450 square feet with a laundry room (which could be turned into a 3rd bedroom), has a bonus sunroom, and 2-car garage. Structurally it’s in very good shape. The roof and gutters only a year and a half old. The siding is all brick. Water heater 5 years old. Electrical and plumbing all updated within the last 4 years. The tenant that moved out last week was paying $1,000 per month.

How does this second investment property play out for me? Check out my blog. Link in my profile.

BAD NEWS

A few weeks ago I got a tip from the BP Community (Thanks @Bo Kim and @Ray Sizzum) that my Morris Invest property was vacant. First reaction? SHOCK, obviously. But, also not surprised seeing how the last year with Oceanpointe has gone.

So, I sent out a third party Property Management company to take a look and verify with photos.

Sure enough...the property has a lock box on the front door! Neighbors confirmed the property was in fact vacant. To make matters worse?

The garage door lock was knocked off and there appeared to be someone potentially squatting in the garage!

Obvious repairs are also needed after neglect.

NEXT STEPS

-I hired a new property manager to take over the Morris Invest property

-Side note: I also hired a different property manager to take over my second property. This will allow me to better vet each company’s service and quality

-I’m re-keying all doors and securing the garage of the Morris Invest property

-I’m assessing repairs needed on the Morris Invest property with my new property manager. Thankfully I haven’t spent any cash flow from the past year.

-I’m looking at multiple angles moving forward: repair and rent OR repair and sell

[Ayodeji Kuponiyi]

@Tyler Jahnke thanks for sharing. That's crazy that the property was vacant. 

[Brent M.]

@Tyler Jahnke

Well dang, Congrats on 2 purchases all within a few months apart, are you all in cash on both properties or financed on 1.

86k for a 1k rental seems good, after a few rehab would still beat the 1% rule.

I've tried to direct commenters on MI's Youtube channel to check out BP Morris Invest, but I think the comments get removed lol.

Anyways stay vigilant and seems you've got past some of those rough patches.

[Mike Malfitani]

I'm curious how you were receiving rent checks for this property when it was never occupied?  That is a huge red flag.

[Tom D.]

Guys if it isn't painfully obvious by now that this is Ponzi scheme I don't know what to tell you. New investor money pays rent on vacant units until the new money runs out. Then you are left with an abandoned house in need of huge repairs. Mark my words, this will end in a huge class action suit with new investors left holding the bags.

[Jay Hinrichs]

@Tom D.  I think the biggest unintended consequence is that @Tyler Jahnke  very innocently described every month getting his check .. and then others following the thread at about the 3rd month the check came in they decide OK well its working all the nay sayers are just that we will go ahead.. And the reason Tyler in my mind got anything done on his house was his brilliant move to bring his rehab and purchase to BP and make it public this put pressure on Morris to do something.

this is a very sad thing but way up in the thread and for anyone who has followed me for close to 20,000 posts the pictures of Tylers Morris house is simply Normal.. this is  what happens to low value assets.

Now he restarted and at least bought something that has half a chance he moved up the rental food chain.. all these people buying low end houses and low end duplex's in INdy are in for a roller coaster ride.

[Diane G.]

Where did the monthly rental check come from if the property is vacant?  

[Jay Hinrichs]

Originally posted by @Diane G.:

Where did the monthly rental check come from if the property is vacant?  

 well I think he said it came from oceanpointe and if I was guessing they did that for social media reasons they did not want Tyler of 540 post thread fame saying he was not getting rent..

most turn key companies though if they are going to guarantee rent and I have never seen that mentioned in 1000 or so thread responses related to Morris.. will tell you when you buy so you know your house maybe vacant but the company is paying the money.. if your led to believe you have a paying tenant and the company is really paying.. then read the other posts that speculate other things are going on.

but the reality is a vacant house in this area is a target most likely its going to cost him 2 to 5k to get it rentable again he is going to  lose income.. and his house is not worth what he paid for it .. so there you go.  How many do you want Diane ???

[Diane G.]

Jay Hinrichs so do you think there never was any tenant from the start, or the Tenant moved out later on?