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!

[Tyler Jahnke]

Hey @Diane G. - Thanks to the amazing BP community, a couple people in Indianapolis were driving by my property and noticed a lock box on the front door.

I then sent a third party property management company to go out there and investigate. Sure enough, there was a lock box on the front door and they talked to the neighbors. The property was vacant, but I'm not sure how long. I talked with the utility company and they said electricity was shut off over a month prior to me finding out all of this.

-Tyler

[Brian H.]

Originally posted by @Tyler Jahnke:

Hey @Diane G. - Thanks to the amazing BP community, a couple people in Indianapolis were driving by my property and noticed a lock box on the front door.

I then sent a third party property management company to go out there and investigate. Sure enough, there was a lock box on the front door and they talked to the neighbors. The property was vacant, but I'm not sure how long. I talked with the utility company and they said electricity was shut off over a month prior to me finding out all of this.

-Tyler

 So.... do you know what happened? The PM company just screwed you? I started reading most of this but 29 pages is a LOT for me with my sparse free time!  I'm really happy to see you at least got your money back and now have two other properties. 

[Tyler Jahnke]

Hey @Brian Bertsch - I don't have all the details, but boils down to me buying in an asset class that I personally believe has a slim chance of holding up long term, poorly run property management company, false promises from Morris Invest, lack (NO) communication. Best of luck and let me know if you have any questions!

-Tyler

[Andrey Y.]

Mr. Morris is still peddling strong. Daily emails about passive cash flow, dreams of financial freedom, how to pay no taxes, etc. It seems like with all of the folks on this thread who gave their last/only $25-50K to Morris Invest only to be scammed and lied to, he is still doing pretty well for himself.

[Andrey Y.]

Any progress on that group/class action suit against Morris Invest / Oceanpointe ? 

@Jay Hinrichs have you heard anything?

[Jay Hinrichs]

Originally posted by @Andrey Y.:

Any progress on that group/class action suit against Morris Invest / Oceanpointe ? 

@Jay Hinrichs have you heard anything?

 I believe there are victims that have started litigation .  as to class action I don't know.. but I think it may be forth coming.. my real interest is to see if the AG or feds indict him. 

[Patrick Shawn Faherty]

Originally posted by @Jay Hinrichs:

Originally posted by @Andrey Y.:

Any progress on that group/class action suit against Morris Invest / Oceanpointe ? 

@Jay Hinrichs have you heard anything?

 I believe there are victims that have started litigation .  as to class action I don't know.. but I think it may be forth coming.. my real interest is to see if the AG or feds indict him. 

 Jay, what is your take on Clayton/MorrisInvest now?  I thought I'd read you were a large holder of his T/K properties and were a fan? Thanks.

[Jay Hinrichs]

Originally posted by @Patrick Shawn Faherty:

Originally posted by @Jay Hinrichs:

Originally posted by @Andrey Y.:

Any progress on that group/class action suit against Morris Invest / Oceanpointe ? 

@Jay Hinrichs have you heard anything?

 I believe there are victims that have started litigation .  as to class action I don't know.. but I think it may be forth coming.. my real interest is to see if the AG or feds indict him. 

 Jay, what is your take on Clayton/MorrisInvest now?  I thought I'd read you were a large holder of his T/K properties and were a fan? Thanks.

say what .. you obviously have not read my responses to these threads... My opinion of his business model has never changed.. poor model ridiculously poor execution and many crushed investors in their wake..  there were a few locals in the beginning of these threads that were doing business with him that defended him.. but it was not me. I can assure you of that.. and I am not a landlord.

[Mark Whitted]

This whole story is so sad for my wife and me. Clayton is the reason we am now real estate investors. I heard him on Leo Laport’s TWIT podcast in March 2017 and started listing to Clayton’s podcast nearly every waking moment. After listening to “episode 0” of the podcast my wife said, “That sounds great. We should do that.” 

Memorial Day week 2017 we took a road trip through the Midwest; first stop: Indianapolis to tour Clayton’s operation. Only timing kept us from investing. 

Just before that trip, I invested my self directed IRA into a note with another TK provider, American Wealth Builders, backed by four of their properties being rehabbed in Cleveland. (We saw the houses on our Memorial Day tour.) So all of our capital was tied up for 12 months. (You can read about that experience elsewhere on BP.)

Jump ahead a year and we closed on on 8/17/2018 on our first physical investment, an A/B class duplex in Rockwall, TX for a house hack. We are in the process of moving into the newly renovated vacant side and have signed the 5 year month to month tenants in the other side to a new 2 year lease with built in rent increases to bring them up to market. When they leave, we will update their side and hopefully cash out refinance and go do it (house hack) again. We have found a probable supply of at least 5-7 duplexes in the area and could possibly purchase another one or two in the next 6 months, possibly by the end of the year. 

So we still have Clayton Morris to thank for starting our real estate career. But we are disappointed in how his business has turned out. 

[Patrick Shawn Faherty]

Originally posted by @Jay Hinrichs:

Originally posted by @Patrick Shawn Faherty:

Originally posted by @Jay Hinrichs:

Originally posted by @Andrey Y.:

Any progress on that group/class action suit against Morris Invest / Oceanpointe ? 

@Jay Hinrichs have you heard anything?

 I believe there are victims that have started litigation .  as to class action I don't know.. but I think it may be forth coming.. my real interest is to see if the AG or feds indict him. 

 Jay, what is your take on Clayton/MorrisInvest now?  I thought I'd read you were a large holder of his T/K properties and were a fan? Thanks.

say what .. you obviously have not read my responses to these threads... My opinion of his business model has never changed.. poor model ridiculously poor execution and many crushed investors in their wake..  there were a few locals in the beginning of these threads that were doing business with him that defended him.. but it was not me. I can assure you of that.. and I am not a landlord.

 Sorry for my mis-remembering and thanks for the clarification! 

[Colin Zhu]

@Mark Whitted we have similar stories. I started investing out-of-state because of Clayton's podcasts. The big difference is, you guys dodged a bullet and we got hit!

-Colin Zhu

[Will Zena]

@Mark Whitted and @Colin Zhu I also began listening to Clayton when I started my journey. I dodged a big bullet thanks to bigger pockets members speaking out. I have purchased 2 SFHs so far and working on the 3rd hopefully before years end. But I feel for those that were taken advantage of.

[Patrick Shawn Faherty]

Originally posted by @Will Zena:

@Mark Whitted and @Colin Zhu I also began listening to Clayton when I started my journey. I dodged a big bullet thanks to bigger pockets members speaking out. I have purchased 2 SFHs so far and working on the 3rd hopefully before years end. But I feel for those that were taken advantage of.

Will, did you go with another TK provider or some other route?

[Will Zena]

@Patrick Shawn Faherty I went with Real Weath Network that is owned and operated by Kathy Fettke. We couldn't be happier to this point. I would recommend looking into their company further if you are interested in TK.

[Mark Whitted]

I actually found our duplex though a Zillow alert. I’m still open to TK if the numbers work. But it looks like we could keep busy with duplexes in our area for a while. :) The guy we bought this one from has at least 5 more in the area and is considering selling. There is another investor on our block who is also considering selling. 

I would also be interested in out of state investing, possibly using a TK supplier as a wholesaler/rehabber to be my “boots on the ground”. 

[Patrick Shawn Faherty]

Originally posted by @Will Zena:

@Patrick Shawn Faherty I went with Real Weath Network that is owned and operated by Kathy Fettke. We couldn't be happier to this point. I would recommend looking into their company further if you are interested in TK.

 Thanks I am familiar with them and have considered some of her syndications. 

[Tyler Jahnke]

Hey BP,

Today's random update: this Morris Invest property that I USED to own and sold in May 2018 is officially back on the market FOR RENT at $790 per month. Looks like the investors that I sold the property to put some nice work into it. I've included pictures from the condition it was in when I sold it compared to now. Best of luck to them in turning this investment around. I wish them success!

BEFORE Front

BEFORE Side

NOW Front

BEFORE Dining/Living

NOW Dining/Living

BEFORE Kitchen

NOW Kitchen

NOW Hallway

BEFORE Bathroom

NOW Bathroom

NOW Bedrooms

-Tyler

[Jay Hinrichs]

yup they did a real rehab..   will all hinge on tenant not beating it up in that neighborhood.

[Caleb Heimsoth]

@Tyler Jahnke Good luck with your new purchase. I try to stick to around 60k purchases minimum for single family and probably 80k minimum for duplexes. At 795 a side you’ll have a much better tenant class. Most of my rentals are in the 750-900 range and it’s been very manageable so far. Over the next couple years I’ll probably migrate closer to 900 and above. I’m not in Indy but in the markets I am in, the class of tenant falls off a cliff at anything 650 and below typically.

[Colin Zhu]

Wow, yah hope they find quality tenants. Good for them!

[Tyler Jahnke]

Hey @Caleb Heimsoth - 100% agree with you. Obviously, I learned the hard way...but picked up a ton of valuable advice along the way especially from @Jay Hinrichs.

But, to your point I only touch B Class now. I currently own:

-A single family renting for $1,000 per month

-Duplex unit renting for $850 per month

-Duplex unit listed for $900 per month

-Tyler

[Caleb Heimsoth]

Originally posted by @Tyler Jahnke:

Hey @Caleb Heimsoth - 100% agree with you. Obviously, I learned the hard way...but picked up a ton of valuable advice along the way especially from @Jay Hinrichs.

But, to your point I only touch B Class now. I currently own:

-A single family renting for $1,000 per month

-Duplex unit renting for $850 per month

-Duplex unit listed for $900 per month

-Tyler

You’ll be much happier in those ranges.  Mine are rented for 800, 785, 775, 850.  All single family.  My next one will probably be in the 850-950 rent range.  Of course market rent will increase as well.  The 775 one for example has market rent now of roughly 825 a month.  Of course I don’t really care about that since the tenants in there right now are great and I want to keep it that way.  

Another tip from Jay is to not always raise rent to keep good tenants.  I follow that one too.  

[Will Zena]

One of my homes is a C class currently renting for $1,000 nad purchased for $60k. A real renovation can demand good rent in the right area

[John Gochangco]

@Tyler Jahnke thanks for your original "naked" post. I stumbled on this just this Saturday! Took me hours to read to all the posts connected to your original post! You have taught a lot of us newbies a valuable lesson. The money that you spent on "that" deal has exponentially paid itself for you and the hundreds or thousands that have read the post. I just discovered BP this spring. I'm planning to go into long distance REI too as I live in Sactown CA. I'd like to connect with you on your insight on this. Will send you a PM.

[Mark Whitted]

@John Gochangco Check out David Greene’s book “Long-Distance Real Estate Investing” here on Bigger Pockets.