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!

[Clayton Mobley]

@Jay Hinrichs couldn't agree more. There is something in American culture that makes us believe anything on TV or with a flashy enough veneer must be worthwhile. That all rich people (or at least those that sell the image of wealth) deserve everything they have and therefore must be trustworthy. It's not even a conscious thing, I think, it's deeply rooted somewhere inside us so that we don't even question: this guy has money and success, ergo he must have earned it, ergo I should trust him and follow his advice. But this guy proves you can have a 6000 sqft house and not have earned a single inch.

It really is so heartbreaking for the folks that lost so much to this guy. Certainly not their fault - crimes are always the fault of the criminal, not the victim, but it is still baffling that he got away with it so long.

I guess the upside maybe (for the industry, certainly not for the people he screwed, unfortunately) is that this is such a huge mess, so high profile in terms of our little corner of the investing world, that maybe it will serve as a reminder and a warning for a long time to come. This thread will be used for years as a shortcut for what to look for. New investors will say 'how do I choose a turnkey company and not get scammed' and we can just be like 'here's a link, look out for every single thing this guy did'. 

[Will Zena]

I amamazed the Rich Dad group is behind Clayton Morris. They are clearly blinded by the Foxnews persona as well. But that certainly adds credibility. 

[Jay Hinrichs]

Originally posted by @Will Zena:

I amamazed the Rich Dad group is behind Clayton Morris. They are clearly blinded by the Foxnews persona as well. But that certainly adds credibility. 

really ?  was not aware of that will have to do some diving into that one I know the owners of RD ..  I doubt they want to get slandered along with Morris.. they need their students to be successful.. 

[Tim Cern]

Stumbled across this SEC tweet the other day and it reminded me of Morris's sales tactics on his investor emails. 

I cannot find an old one but I recall the email copy stating something like "Screaming Hot Duplex for sale, will be gone by noon, hurry and secure it now"  

Its actually quite amazing that Morris and Bert are still freely operating their respective businesses. 

[Steve K.]

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

 Clayton the craziest part is this is not past tense: he didn’t get away with it, he’s still getting away with it. The videos aren’t just still out there,  new ones are being made every few days with hundreds of likes and comments on them from adoring fans while negative comments get scrubbed. People are probably signing contracts with him today.         I feel for you with your name and having a similar business model (to his supposed model not actual one I mean). You seem like a good example of doing it right and being successful without having to scam people. There’s so much demand for good turnkey companies, all of the marketing he does is just unnecessary and leads to more volume than his ground partners can handle which causes the problems. Now he’s probably making more money off the youtube channel anyway, too bad he didn’t stick with media the whole time people seem to live his videos.

[Mark Whitted]

Clayton frequently interviews a lot of the RD advisors. Like Tom Wheelwright and Garrett Sutton. 

[Steve K.]

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

Jay aren’t these contracts unbelievable? If I were a victim I would just say the contract is void: no legal description, not even filled out in many important sections, seller name and info wasn’t even on there, broker was an unlicensed fraud, give me my money back I’ll convey the deed back to the owner. But to be honest the first sales contract I signed I didn’t know what I was looking at either, I just trusted my agent to walk me through it and most of these investors were buying their first investment so they just trusted CM who is a con man. So what criminal charges do you think are forthcoming? How long were Marquis/ Duecher and those guys operating their scam in full daylight before they got busted?

[Will Zena]

Originally posted by @Jay Hinrichs:

Originally posted by @Will Zena:

I amamazed the Rich Dad group is behind Clayton Morris. They are clearly blinded by the Foxnews persona as well. But that certainly adds credibility. 

really ?  was not aware of that will have to do some diving into that one I know the owners of RD ..  I doubt they want to get slandered along with Morris.. they need their students to be successful.. 

 Oh yes Wheelright, Kiyosaki, Sutton are always on the podcast and he has been on all of theres as well. He has gone to Kiyosaki's house for dinner as well.  He is a client of Wheelrights.

[Clayton Mobley]

@Steve K. WOW I honestly didn't realize that he was still putting out content. I guess people outside of BP wouldn't have a way to know what this guy is really up to unless they did the deep digging of checking to see if he's being SUED FOR FRAUD lol. I think most folks would assume that if he's actively still operating that he's not currently a defendant in a bunch of fraud cases, so they wouldn't even look - it's not the kind of thing most folks think to check. 

I agree, criminal charges have to be filed. The fact that he is still putting out content and even, I guess based on a few comments upstream, starting some new 'company' about financial advice just shows you how completely shameless he is - he honestly thinks he can/will/should get away with this - and truthfully if he's stolen enough money, he might. A big bank account can get you out of a lot of trouble.

And yes, we are a turnkey provider, but nothing like Morris - not just the fraud part. We actually live and work in our market, we do all the purchasing, rehab, and management - a full-service operation, not selling low-tier 'investments' all over the country. I'm not sure what I'd call the Morris Model, it's definitely not real turnkey, which is what is so annoying about what he's doing to the TK industry. People don't know the difference between whatever the heck he's doing and an actual investment company with skin the game.

[Will Zena]

Originally posted by @Steve K.:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

 Clayton the craziest part is this is not past tense: he didn’t get away with it, he’s still getting away with it. The videos aren’t just still out there,  new ones are being made every few days with hundreds of likes and comments on them from adoring fans while negative comments get scrubbed. People are probably signing contracts with him today.         I feel for you with your name and having a similar business model (to his supposed model not actual one I mean). You seem like a good example of doing it right and being successful without having to scam people. There’s so much demand for good turnkey companies, all of the marketing he does is just unnecessary and leads to more volume than his ground partners can handle which causes the problems. Now he’s probably making more money off the youtube channel anyway, too bad he didn’t stick with media the whole time people seem to live his videos.

 I just got an email he just went live. The email title is "[Going live NOW] Set your money on FIRE".  Amazing the Irony in the title.

[Steve K.]

Originally posted by @Will Zena:

Originally posted by @Steve K.:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

 Clayton the craziest part is this is not past tense: he didn’t get away with it, he’s still getting away with it. The videos aren’t just still out there,  new ones are being made every few days with hundreds of likes and comments on them from adoring fans while negative comments get scrubbed. People are probably signing contracts with him today.         I feel for you with your name and having a similar business model (to his supposed model not actual one I mean). You seem like a good example of doing it right and being successful without having to scam people. There’s so much demand for good turnkey companies, all of the marketing he does is just unnecessary and leads to more volume than his ground partners can handle which causes the problems. Now he’s probably making more money off the youtube channel anyway, too bad he didn’t stick with media the whole time people seem to live his videos.

 I just got an email he just went live. The email title is "[Going live NOW] Set your money on FIRE".  Amazing the Irony in the title.

Yeah there was one not long ago “How to avoid wire fraud”, this whole thing is stranger than fiction. 

[Mark Whitted]

@Will Zena

I got it too! Exactly my thought. 

I’ve said it on this thread before, but Clayton’s troubles are really sad for me. If it weren’t for Clayton Morris and his podcast, I wouldn’t be a real estate investor today. It looks like I was actually blessed to not be in a position financially to actually pull the trigger on anything two years ago. 

[Steve K.]

Originally posted by @Clayton Mobley:

@Steve K. WOW I honestly didn't realize that he was still putting out content. I guess people outside of BP wouldn't have a way to know what this guy is really up to unless they did the deep digging of checking to see if he's being SUED FOR FRAUD lol. I think most folks would assume that if he's actively still operating that he's not currently a defendant in a bunch of fraud cases, so they wouldn't even look - it's not the kind of thing most folks think to check. 

I agree, criminal charges have to be filed. The fact that he is still putting out content and even, I guess based on a few comments upstream, starting some new 'company' about financial advice just shows you how completely shameless he is - he honestly thinks he can/will/should get away with this - and truthfully if he's stolen enough money, he might. A big bank account can get you out of a lot of trouble.

And yes, we are a turnkey provider, but nothing like Morris - not just the fraud part. We actually live and work in our market, we do all the purchasing, rehab, and management - a full-service operation, not selling low-tier 'investments' all over the country. I'm not sure what I'd call the Morris Model, it's definitely not real turnkey, which is what is so annoying about what he's doing to the TK industry. People don't know the difference between whatever the heck he's doing and an actual investment company with skin the game.

You should check out the new content. I agree you legit turnkey guys are being hurt by this, he’s certainly made me wary of investing remotely. Somebody said on here that an out of state investment is not so much an investment in property as it is in a group of people and that’s spot on. 

[Nicholas Bolcon]

@Mark Whitted I am thinking the same thing.  I first started being interested in rental real estate by listening to Clayton's podcast.  And I will say I think he had some sound advice on there.  But I started to notice that the podcasts were solely geared towards his strategy and his turnkey company.  He would insult all other models for investment.  Whereas when I started listening to the BP podcast they were much more open to a huge variety of strategies.  It made Clayton's seem a bit fishy.  I looked at his turnkey website (this was 6-9 months ago) and a few quick Google searches led me to BP forum complaints about him.  For anyone still using him today it only takes a very brief search to start uncovering the dirt.  2 years ago it probably wasn't so obvious.  I am glad I did not fall into the trap.

[Brian M.]

@Jay Hinrichs I think the reason this fraud went on as long as it did is due to the nature of the fraud itself.  Sure, there were an initial few who blindly trusted Morris due to his TV persona, but it's really two main factors that fueled this engine for so long:  1)  A very successful social media campaign and 2)  paying fake rent.  

The fact is, a lot of people waited a long time from the initial discovery of Morris Invest to when they moved forward with investing.  They researched, they spoke to other investors, etc.  There was little to no negative information from anyone (other than a few folks who questioned his strategy of investing in cheap properties).  Everyone who invested with MI was getting regular "rent" payments and things seemed to be going swimmingly.  You can see that a lot of investors moved forward with more and more properties after their initial one seemed to go so well.

That is the insidiousness with a Ponzi scheme like this.  It pays off for a long enough period of time that the investors are happy.  There is no negative press.  Until the whole thing implodes.

[Bill F.]

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

[Clayton Mobley]

@Steve K. I should go look at his videos. I've avoided them because I know how pi**ed they'll make me lol.

@Bill F. Wow, what a fantastic analysis. This really all lines up so well, and I think this is a great post (maybe you should repost elsewhere for the masses) to highlight all the very human foibles that we are all subject to at times, but which can really lead you down the wrong path if you don't take the time to turn inward and really weigh your own biases. I think if people were a little more aware of/ comfortable with the fact that these human psychological booby traps not only exist, but are very easy to fall into even for the educated/experienced/professionals - it's how we're wired as animals - maybe fewer investors would get taken for these rides. Heck, a lot of these things have implications way bigger than just REI.

Also: "Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave." I genuinely snorted into my coffee, sir. Great stuff.

[Bill F.]

@Clayton Mobley

Thank you for your kind words. I agree 100% that most investors spend too much time on the fun stuff, looking at 'deals', building models, picking paint colors and don't spend enough time in self reflection to understand what the are and aren't good at. 

Two quotes come to mind about this very idea. One from Nassim Taleb, former prop trader turned author/philosopher: 

“My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it.”

Second is from a hedge fund manager that no has ever heard of named Seth Klarman, but who has done well for himself, if you consider running one of the ten most profitable hedge funds ever doing well. 

"The economics, the valuation of the business, is not hard. The psychology -- How much do you buy? Do you buy it at this price? Do you wait for a lower price? What do you do when it looks like the world might end? Those are the harder things."

Also let me thank you for taking the time to help those that have been involved with MI and to be a voice for what TK done "right" looks like.

[Rob Hakes]

This is going to sound distasteful to anybody reading this comment that has lost money from MI but:

There has been nothing more entertaining than opening BP on my lunch break and having another Morris Invest thread with updates to read.  It is like reading a good true crime novel in real time waiting with baited breath for this guy to finally get snagged, but he just keeps going and going.  

I've actually learned a ton from following this saga.  I really hope the courts can act swiftly and stifle this guy.  Just please don't take away my mid afternoon 'soap opera' that has found its place in my weekly routines.

[Son D.]

What is up with the recent Morris Invest thread revivals in March? Is it their anniversary or something? Or is this Clayton drumming up interest to sell his house in NJ?

That's quite some psychological analyzation there @Bill F. Probably hit bulls eye on most of your points. I think in much simpler terms. Clayton Morris aim for people who know nothing about Real Estate therefore do not know any better. People who are emotional and willing to pay more. They don't know the steps of due diligence. They wouldn't know if documents or information is missing. They are OOS or OO Country and would not know etc. etc. Basically like first time home owners, except even better. These owners do not see what they've purchased until much too late.

As for why he's still able to chug along like nothing has happened, that I blame the overloaded system. It takes too long from the time you decide to get a lawyer to when you actually go to court. Look at the cases that are there now. He stalls the trial date by constantly filling motions to delay and the court will gladly hand it to him. Criminal cases will also not go forward until they're able to get plenty of evidence to go after him. News reporters will also not do a peace until they have enough. And as someone mentioned in one of the threads long ago. The public at large generally doesn't care about a bunch of landlord investors losing to their money.

This saga will be like the MCU. This is not one year looking back but a decade looking back. We won't see the snowball effects until many years down the road. Right now the needle does not seem to have moved much but I think him selling his house is a clue that all this does affect him. Why would he do this after spending all that time and money to do his youtube set up in his home, even if it's not for monetary reasons? How would you sleep at night if you know that hundreds of people whose life savings you've swindled know where you live? 

[Steve K.]

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

Bill the architect of this scam has definitely picked their mark carefully. New investors eager to succeed are impressionable which makes them easy prey. They also come with a shrewd built-in advantage for the predator which is that those who are swayed that much by cute videos are unlikely to be the sort of people who collect kneecaps from those who have crossed them. 

Sub $50k houses work well as the snake oil not only for the "distortion by contrast" effect you outlined but also from a basic practical sense in that it's hard to find a lender on that asset class (which would require inspection/appraisal/professional eyeballs on the deal). $50k is also conveniently too big for small claims court but not big enough to interest many lawyers. 

 I agree with you that this was a work. However I think you have laid out a more in-depth understanding of these traits than CM even has.     

After looking through the court files, I'm starting to believe CM may be as much of a patsy as the victims in this. His success with the videos comes from his relatable "everyman" self-deprecating C-student vibe that at first I thought was an act, but maybe it's not. Maybe he's been set up by somebody more sophisticated and more sinister. 

As a newbie in RE himself, he wouldn't know how to write those contracts the way they were written, or to target new investors, or to use sub $50k houses. I don't see him being cynical or seasoned enough in scamming to set up the sales pitch with a polished bait and switch laced with a potent dose of FOMO the way it was. If he was that slick why is his signature on everything? Why would he put his face and good name all over this obvious scam? Meanwhile his partner is practically a ghost who was just granted a motion to dismiss... 

 I'm actually starting to believe him that he was swindled by his partner. But to be clear this doesn't absolve anyone of guilt. CM must have known what was happening very early on if not from the actual beginning, and made the Faustian bargain when he chose to continue being part of it. He could have quit when it became obvious these houses weren't helping anyone hit their freedom number except him and his partners. At that critical junction he became complicit and (allegedly) fraudulent himself. 

But his partner is looking a lot more like the real Keyser Soze in this crime novel with every turned leaf. Perhaps the most revealing detail is how he's been in the background while everyone has been looking at CM. CM is right out there in the public, inviting us into his home with his videos, a social influencer with a lot to lose by ruining his reputation. Meanwhile this other guy has dozens of different shell businesses set up. His personal name appears almost nowhere in the evidence/exhibits. The address that his summons and subpoenas are going to is the same nondescript warehouse that his dozens of shell businesses are registered to. He has no social media, no pictures, no videos, no online presence, nothing. We know that he's lost his broker's license and been disciplined for RE scams in the past. Seems to me like CM may actually be a lamb being lead to the slaughter. A conniving, manipulative, greedy lamb, but nonetheless not the main architect of this scam, for whatever that is worth to anybody at this late point in the ordeal (probably not much). 

[Jay Hinrichs]

Originally posted by @Steve K.:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

Bill the architect of this scam has definitely picked their mark carefully. New investors eager to succeed are impressionable which makes them easy prey. They also come with a shrewd built-in advantage for the predator which is that those who are swayed that much by cute videos are unlikely to be the sort of people who collect kneecaps from those who have crossed them. 

Sub $50k houses work well as the snake oil not only for the "distortion by contrast" effect you outlined but also from a basic practical sense in that it's hard to find a lender on that asset class (which would require inspection/appraisal/professional eyeballs on the deal). $50k is also conveniently too big for small claims court but not big enough to interest many lawyers. 

 I agree with you that this was a work. However I think you have laid out a more in-depth understanding of these traits than CM even has.     

After looking through the court files, I'm starting to believe CM may be as much of a patsy as the victims in this. His success with the videos comes from his relatable "everyman" self-deprecating C-student vibe that at first I thought was an act, but maybe it's not. Maybe he's been set up by somebody more sophisticated and more sinister. 

As a newbie in RE himself, he wouldn't know how to write those contracts the way they were written, or to target new investors, or to use sub $50k houses. I don't see him being cynical or seasoned enough in scamming to set up the sales pitch with a polished bait and switch laced with a potent dose of FOMO the way it was. If he was that slick why is his signature on everything? Why would he put his face and good name all over this obvious scam? Meanwhile his partner is practically a ghost who was just granted a motion to dismiss... 

 I'm actually starting to believe him that he was swindled by his partner. But to be clear this doesn't absolve anyone of guilt. CM must have known what was happening very early on if not from the actual beginning, and made the Faustian bargain when he chose to continue being part of it. He could have quit when it became obvious these houses weren't helping anyone hit their freedom number except him and his partners. At that critical junction he became complicit and (allegedly) fraudulent himself. 

But his partner is looking a lot more like the real Keyser Soze in this crime novel with every turned leaf. Perhaps the most revealing detail is how he's been in the background while everyone has been looking at CM. CM is right out there in the public, inviting us into his home with his videos, a social influencer with a lot to lose by ruining his reputation. Meanwhile this other guy has dozens of different shell businesses set up. His personal name appears almost nowhere in the evidence/exhibits. The address that his summons and subpoenas are going to is the same nondescript warehouse that his dozens of shell businesses are registered to. He has no social media, no pictures, no videos, no online presence, nothing. We know that he's lost his broker's license and been disciplined for RE scams in the past. Seems to me like CM may actually be a lamb being lead to the slaughter. A conniving, manipulative, greedy lamb, but nonetheless not the main architect of this scam, for whatever that is worth to anybody at this late point in the ordeal (probably not much). 

 I would agree with this.. but this is not the case.. Mr. Morris knew early on that he had a horrific ground partner..  He was calling other PM's that I know 2  plus years ago.. admitting he had a problem.. But he steamed ahead and sold another 300 to 400 homes.

As well as his delusional thoughts that these homes actually will work for out of area investors like he said.. If he truly believe that then like I said he is just not very bright and delusional.  He knew full well what was going on years ago

Greed is a very powerful thing.. you start selling 30 homes a month and charging 5k a sale .. so 150k a month coming into your checking account.. people look the other way and hope for the best..  bottom line  BAD ACTOR GUILTY as charged is my thoughts.

[Steve K.]

Originally posted by @Jay Hinrichs:

Originally posted by @Steve K.:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

Bill the architect of this scam has definitely picked their mark carefully. New investors eager to succeed are impressionable which makes them easy prey. They also come with a shrewd built-in advantage for the predator which is that those who are swayed that much by cute videos are unlikely to be the sort of people who collect kneecaps from those who have crossed them. 

Sub $50k houses work well as the snake oil not only for the "distortion by contrast" effect you outlined but also from a basic practical sense in that it's hard to find a lender on that asset class (which would require inspection/appraisal/professional eyeballs on the deal). $50k is also conveniently too big for small claims court but not big enough to interest many lawyers. 

 I agree with you that this was a work. However I think you have laid out a more in-depth understanding of these traits than CM even has.     

After looking through the court files, I'm starting to believe CM may be as much of a patsy as the victims in this. His success with the videos comes from his relatable "everyman" self-deprecating C-student vibe that at first I thought was an act, but maybe it's not. Maybe he's been set up by somebody more sophisticated and more sinister. 

As a newbie in RE himself, he wouldn't know how to write those contracts the way they were written, or to target new investors, or to use sub $50k houses. I don't see him being cynical or seasoned enough in scamming to set up the sales pitch with a polished bait and switch laced with a potent dose of FOMO the way it was. If he was that slick why is his signature on everything? Why would he put his face and good name all over this obvious scam? Meanwhile his partner is practically a ghost who was just granted a motion to dismiss... 

 I'm actually starting to believe him that he was swindled by his partner. But to be clear this doesn't absolve anyone of guilt. CM must have known what was happening very early on if not from the actual beginning, and made the Faustian bargain when he chose to continue being part of it. He could have quit when it became obvious these houses weren't helping anyone hit their freedom number except him and his partners. At that critical junction he became complicit and (allegedly) fraudulent himself. 

But his partner is looking a lot more like the real Keyser Soze in this crime novel with every turned leaf. Perhaps the most revealing detail is how he's been in the background while everyone has been looking at CM. CM is right out there in the public, inviting us into his home with his videos, a social influencer with a lot to lose by ruining his reputation. Meanwhile this other guy has dozens of different shell businesses set up. His personal name appears almost nowhere in the evidence/exhibits. The address that his summons and subpoenas are going to is the same nondescript warehouse that his dozens of shell businesses are registered to. He has no social media, no pictures, no videos, no online presence, nothing. We know that he's lost his broker's license and been disciplined for RE scams in the past. Seems to me like CM may actually be a lamb being lead to the slaughter. A conniving, manipulative, greedy lamb, but nonetheless not the main architect of this scam, for whatever that is worth to anybody at this late point in the ordeal (probably not much). 

 I would agree with this.. but this is not the case.. Mr. Morris knew early on that he had a horrific ground partner..  He was calling other PM's that I know 2  plus years ago.. admitting he had a problem.. But he steamed ahead and sold another 300 to 400 homes.

As well as his delusional thoughts that these homes actually will work for out of area investors like he said.. If he truly believe that then like I said he is just not very bright and delusional.  He knew full well what was going on years ago

Greed is a very powerful thing.. you start selling 30 homes a month and charging 5k a sale .. so 150k a month coming into your checking account.. people look the other way and hope for the best..  bottom line  BAD ACTOR GUILTY as charged is my thoughts.

Jay I agree with you on the Greed and the Guilt 100%, I'm just starting to think the third G is for Gullible. Take a look at the HUD contracts if you haven't. After looking at those and the motions to dismiss where OP slides out leaving CM holding the bag... seems like the work may have been on CM the whole time! Think about it: this other guy (whose name I'm afraid to mention because he's likely a very bad dude) has been in RE a long time, had his license revoked, knows how to set something like this up. I see him being the mastermind and using CM. CM was foolish enough to go along with it even though he was the one whose signature is all over the contracts and his youtube channel is chock full of evidence. This other dude is Keyser Soze 100%. He's like a ghost. CM would have to be stupid to set it up this way. I'd be curious to see how the earnings were divided, I bet OP even got a bigger split than CM.

[Jay Hinrichs]

Originally posted by @Steve K.:

Originally posted by @Jay Hinrichs:

Originally posted by @Steve K.:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

Bill the architect of this scam has definitely picked their mark carefully. New investors eager to succeed are impressionable which makes them easy prey. They also come with a shrewd built-in advantage for the predator which is that those who are swayed that much by cute videos are unlikely to be the sort of people who collect kneecaps from those who have crossed them. 

Sub $50k houses work well as the snake oil not only for the "distortion by contrast" effect you outlined but also from a basic practical sense in that it's hard to find a lender on that asset class (which would require inspection/appraisal/professional eyeballs on the deal). $50k is also conveniently too big for small claims court but not big enough to interest many lawyers. 

 I agree with you that this was a work. However I think you have laid out a more in-depth understanding of these traits than CM even has.     

After looking through the court files, I'm starting to believe CM may be as much of a patsy as the victims in this. His success with the videos comes from his relatable "everyman" self-deprecating C-student vibe that at first I thought was an act, but maybe it's not. Maybe he's been set up by somebody more sophisticated and more sinister. 

As a newbie in RE himself, he wouldn't know how to write those contracts the way they were written, or to target new investors, or to use sub $50k houses. I don't see him being cynical or seasoned enough in scamming to set up the sales pitch with a polished bait and switch laced with a potent dose of FOMO the way it was. If he was that slick why is his signature on everything? Why would he put his face and good name all over this obvious scam? Meanwhile his partner is practically a ghost who was just granted a motion to dismiss... 

 I'm actually starting to believe him that he was swindled by his partner. But to be clear this doesn't absolve anyone of guilt. CM must have known what was happening very early on if not from the actual beginning, and made the Faustian bargain when he chose to continue being part of it. He could have quit when it became obvious these houses weren't helping anyone hit their freedom number except him and his partners. At that critical junction he became complicit and (allegedly) fraudulent himself. 

But his partner is looking a lot more like the real Keyser Soze in this crime novel with every turned leaf. Perhaps the most revealing detail is how he's been in the background while everyone has been looking at CM. CM is right out there in the public, inviting us into his home with his videos, a social influencer with a lot to lose by ruining his reputation. Meanwhile this other guy has dozens of different shell businesses set up. His personal name appears almost nowhere in the evidence/exhibits. The address that his summons and subpoenas are going to is the same nondescript warehouse that his dozens of shell businesses are registered to. He has no social media, no pictures, no videos, no online presence, nothing. We know that he's lost his broker's license and been disciplined for RE scams in the past. Seems to me like CM may actually be a lamb being lead to the slaughter. A conniving, manipulative, greedy lamb, but nonetheless not the main architect of this scam, for whatever that is worth to anybody at this late point in the ordeal (probably not much). 

 I would agree with this.. but this is not the case.. Mr. Morris knew early on that he had a horrific ground partner..  He was calling other PM's that I know 2  plus years ago.. admitting he had a problem.. But he steamed ahead and sold another 300 to 400 homes.

As well as his delusional thoughts that these homes actually will work for out of area investors like he said.. If he truly believe that then like I said he is just not very bright and delusional.  He knew full well what was going on years ago

Greed is a very powerful thing.. you start selling 30 homes a month and charging 5k a sale .. so 150k a month coming into your checking account.. people look the other way and hope for the best..  bottom line  BAD ACTOR GUILTY as charged is my thoughts.

Jay I agree with you on the Greed and the Guilt 100%, I'm just starting to think the third G is for Gullible. Take a look at the HUD contracts if you haven't. After looking at those and the motions to dismiss where OP slides out leaving CM holding the bag... seems like the work may have been on CM the whole time! Think about it: this other guy (whose name I'm afraid to mention because he's likely a very bad dude) has been in RE a long time, had his license revoked, knows how to set something like this up. I see him being the mastermind and using CM. CM was foolish enough to go along with it even though he was the one whose signature is all over the contracts and his youtube channel is chock full of evidence. This other dude is Keyser Soze 100%. He's like a ghost. CM would have to be stupid to set it up this way. I'd be curious to see how the earnings were divided, I bet OP even got a bigger split than CM.

there Is an easy answer for Morris he needs to cross complain against OP.. which I am sure that will happen soon enough.. however the fact remains Morris KNEW he had major issues years before this all blew up..  

[Steve K.]

Originally posted by @Jay Hinrichs:

Originally posted by @Steve K.:

Originally posted by @Jay Hinrichs:

Originally posted by @Steve K.:

Originally posted by @Bill F.:

Originally posted by @Jay Hinrichs:

Originally posted by @Clayton Mobley:

@Steve K. thanks for this detailed rundown. I haven't been keeping close tabs on this situation since it became so obscenely apparent that it was the scam of all scams, but somehow this guys name and business still keep popping up in new investor's threads. I guess the videos are still out there? The number of new investors I've had to direct to this thread and others, even in recent weeks.... somehow this guy is still hooking people! Honestly, this whole thing sets the Turnkey industry back in such a big way (and sharing a first name and last initial with him probably isn't doing me any favors).

Anyway, just thought I'd poke my nose back in to see what the latest was and, wow, the claims you outlined are truly jaw-dropping. How he got away with this for the amount of time he did is.... wow.

Thanks again for keeping us posted with the facts.

Clayton  I am still not sure how the heck he pulled that off.. I have been a RE broker for 44 Years now.. and thousands of transactions in the tank.. I have never seen people ( and all you Morris investors please take no offense I am just stating fact as I see it) but how these folks so blindly trusted this guy. I know dealing with the public most folks want proper documentation.. would not just sign blank sales agreements.. Know and understand what a closing statement basically is.. and who the true principals are in the transaction.. 

Maybe its just because we do things the right way.. not that we don't have our dust ups  of course you cant please everyone out there. But I have never seen a situation were the concept delivery and accompany contracts and paper work was as Poor as this or non existent in many cases.  Of course Morris portrayal of C/D class was a fantasy from the get go.. And apparently his buyers were just overwhelmed with the thought process ( he is a TV star so he must be smart and honest).. its the same hook all the TV flipping stars use to get people to come to their 40k work shops..  I want to go see than Merril.. ( not saying he is bad person or anything remotely like Morris) just saying its the same thought process that we as Americans tend to hold those who are on TV on some sort of pedestal. And normal business practices I guess go right out the window.

You guys all raise a really interesting point, how did/does Clayton Morris keep pulling in money from people?

I’ve spent the last year really learning about how great investors and others think, so I cracked open “Seeking Wisdom from Darwin to Munger” and looked at the chapter on reasons for psychological mistake with this MI debacle in mind to get a better idea of why people did/do invest with him. Here are the psychological misjudgments that I found most applicable to Morris Invests: They are in two categories, investor traits that drove them to MI and investor traits that MI took advantage off.

Investor traits.

1. Self-Serving Bias. We are all overly optimist about our own knowledge, skills, and abilities (not a lot of people will say they are below average investors, even when they know nothing) AND we overestimate the degree of control we have and underestimate the role chance plays in our future.

2. Bias from envy/jealously: People have a visceral reaction when they hear someone make $100k in three months on a flip or got $50k to wholesale a deal even if their own investments are doing well. Yes, we know that those grand slams are rare and they are the result of lots of hard work, networking, lead generation ect, but most folks don’t know that and even some that do still get jealous/envious. If the person views the successful individual as someone at a lower station, from any metric, age, profession, education, ect the effect is magnified which drives them to seek increase their own success.

3. Distortion by contrast: MI targeted a lot of high income earners who lived on the coasts, WA, CA, OR, MA, NY, DC ect. There starter homes cost north of $600k, so $40-$60k for an investment gets warped in their heads and this can cause them to view the homes as “funny money” thus no giving the deals the same level of due diligence. It’s just like buying a new car for $35k and getting the sport package for an extra $2k, relative to the car, the add-on is not expensive.

Traits exploited by MI

4. Bias from over influence by liking and reciprocity: these are really two separate traits, but they have a lot of interplay here. Remember Clayton's BP podcast where he said he made the big bucks on TV, but he still had to worry about his contract getting renewed, will he get fired, time away from the kids, long hours? That gets people to think ‘hey he isn't all that different from me'. Plus his on air persona is a likable guy who seems to genuinely want to help (maybe he did start off that we, we have no way of knowing). Pile on that he takes time to give away a ton free content via his website, youtube, podcast ect. That creates reciprocity. He helped you learn about REI in ways you can understand. You like the guy because he shares the same struggles you do, job, family, kids… why not help his company when you start REI, is a win-win?

5. Over influence by social proof: Lots of people can make lots of money in RE, particularly post GFC. This site is proof of that. Drilling down, if other people made money with MI, then it has to be good, right? To quote Warren Buffet (because that’s what I mainly do on here) “What the wise do in the beginning, the fools do in the end” Post GFC  high income earners made lots of $$$ without out a lot of effort via TK. This also leads to the idea that if so many others have done this, then they did the research on MI and everything is good, so I don’t have to.

6. Bias from Authority: If you knew nothing about REI, learned all you know from MI's Youtube page, are you going to question him or his minions on the phone about their insane claims? Not a snowballs chance in hell. Especially if you have seen, or thought you've seen, the social proof of others making money. Add in the other folks he associates with,Wheelright, Kiyosaki, Sutton, and he's made himself the "authority" on TK. The best example of this bias at play is the Milgram Shock experiment. It desn't take a lot for someone who knows a little to view someone who knows slightly more as an "authority".

7. Reason Respecting: Why our C-D rentals better than A-B? Because… [Insert Reason Here]. When you want someone to do something for you, give them a reason. What did you say the last time someone asked 'Can I cut in front of you, I only have three things'? Our brains need to make sense of things, it is a mental imperative. This leads us to believe in dumb, dumb things. This is also part of the reason why people labeled Jay a hater when he called MI on their claim that doctors and nurse lived in the rentals or that people in D class treated them better because they are grateful for a place to live. Jonathan Swift said “You cannot reason a person out of a position he did not reason himself into…”. They believed those claims because it gave them a reason to invest with MI, not because they cared about who actually lived in the units and if that class of folks meshed with their investing style.

8. Believing First Doubting later: This is a fact of our brains, they are programed for a time when the only source of information came from firsthand experience; our five senses. The only way to learn that lighting is hot is to see it catch a tree on fire. Then we went and developed langue followed closely by abstract thought and it’s off to the races. Now Gronk can tell Tad not to go into that valley because lighting strikes there all the time. Maybe it’s true or maybe Gronk doesn’t want Tad to find his sweet cave.

9. Do Something bias: People confuse activity with results all the time. Look no further than the “0-70 units in six months” posts and the adulation they receive, when all they prove is that the person has access to credit. MI goaded investors into this with the classic bait and switch. ‘Here’s a great property. Ohh too slow now it’s gone”

10. Finally, what Charlie Munger like to call the Lollapalooza Tendency Bias: when multiple cognitive biases combine together to form an almost irresistible offer or scenario.

I guess the short answer to why people have invested and still invest with MI is that he has picked his audience carefully and it's a group that is not particularly skilled in making REI decisions.To be fair, most of us aren't very good a making decisions either.

Bill the architect of this scam has definitely picked their mark carefully. New investors eager to succeed are impressionable which makes them easy prey. They also come with a shrewd built-in advantage for the predator which is that those who are swayed that much by cute videos are unlikely to be the sort of people who collect kneecaps from those who have crossed them. 

Sub $50k houses work well as the snake oil not only for the "distortion by contrast" effect you outlined but also from a basic practical sense in that it's hard to find a lender on that asset class (which would require inspection/appraisal/professional eyeballs on the deal). $50k is also conveniently too big for small claims court but not big enough to interest many lawyers. 

 I agree with you that this was a work. However I think you have laid out a more in-depth understanding of these traits than CM even has.     

After looking through the court files, I'm starting to believe CM may be as much of a patsy as the victims in this. His success with the videos comes from his relatable "everyman" self-deprecating C-student vibe that at first I thought was an act, but maybe it's not. Maybe he's been set up by somebody more sophisticated and more sinister. 

As a newbie in RE himself, he wouldn't know how to write those contracts the way they were written, or to target new investors, or to use sub $50k houses. I don't see him being cynical or seasoned enough in scamming to set up the sales pitch with a polished bait and switch laced with a potent dose of FOMO the way it was. If he was that slick why is his signature on everything? Why would he put his face and good name all over this obvious scam? Meanwhile his partner is practically a ghost who was just granted a motion to dismiss... 

 I'm actually starting to believe him that he was swindled by his partner. But to be clear this doesn't absolve anyone of guilt. CM must have known what was happening very early on if not from the actual beginning, and made the Faustian bargain when he chose to continue being part of it. He could have quit when it became obvious these houses weren't helping anyone hit their freedom number except him and his partners. At that critical junction he became complicit and (allegedly) fraudulent himself. 

But his partner is looking a lot more like the real Keyser Soze in this crime novel with every turned leaf. Perhaps the most revealing detail is how he's been in the background while everyone has been looking at CM. CM is right out there in the public, inviting us into his home with his videos, a social influencer with a lot to lose by ruining his reputation. Meanwhile this other guy has dozens of different shell businesses set up. His personal name appears almost nowhere in the evidence/exhibits. The address that his summons and subpoenas are going to is the same nondescript warehouse that his dozens of shell businesses are registered to. He has no social media, no pictures, no videos, no online presence, nothing. We know that he's lost his broker's license and been disciplined for RE scams in the past. Seems to me like CM may actually be a lamb being lead to the slaughter. A conniving, manipulative, greedy lamb, but nonetheless not the main architect of this scam, for whatever that is worth to anybody at this late point in the ordeal (probably not much). 

 I would agree with this.. but this is not the case.. Mr. Morris knew early on that he had a horrific ground partner..  He was calling other PM's that I know 2  plus years ago.. admitting he had a problem.. But he steamed ahead and sold another 300 to 400 homes.

As well as his delusional thoughts that these homes actually will work for out of area investors like he said.. If he truly believe that then like I said he is just not very bright and delusional.  He knew full well what was going on years ago

Greed is a very powerful thing.. you start selling 30 homes a month and charging 5k a sale .. so 150k a month coming into your checking account.. people look the other way and hope for the best..  bottom line  BAD ACTOR GUILTY as charged is my thoughts.

Jay I agree with you on the Greed and the Guilt 100%, I'm just starting to think the third G is for Gullible. Take a look at the HUD contracts if you haven't. After looking at those and the motions to dismiss where OP slides out leaving CM holding the bag... seems like the work may have been on CM the whole time! Think about it: this other guy (whose name I'm afraid to mention because he's likely a very bad dude) has been in RE a long time, had his license revoked, knows how to set something like this up. I see him being the mastermind and using CM. CM was foolish enough to go along with it even though he was the one whose signature is all over the contracts and his youtube channel is chock full of evidence. This other dude is Keyser Soze 100%. He's like a ghost. CM would have to be stupid to set it up this way. I'd be curious to see how the earnings were divided, I bet OP even got a bigger split than CM.

there Is an easy answer for Morris he needs to cross complain against OP.. which I am sure that will happen soon enough.. however the fact remains Morris KNEW he had major issues years before this all blew up..  

Totally. If there was a chance for him to get out with clean hands that ship sailed long ago. Just looking at it now I think that other dude is so much shadier. But I'm just watching this wreck from the crosswalk so what do I know. I also agree we'll probably see a cross-complaint or counterclaim. 

You watched the Marquis thing go down, how does this compare to that in terms of being allowed to continue before charges were brought? Just wondering if you have a sense of when the hammer drops on these guys.