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]

What's Up BiggerPockets family!

WOW...can you believe it's officially been 2 YEARS since I closed on this Morris Invest property and started documenting my journey?!?!

A LOT has happened in that time. I'm not even sure where to start. In the past 2 years:

#1: I've met some AMAZING friends and business partners (@Ake S. @Nick James @Drew Sing@Jonathan James Look @Bo Kim @David Lao @Ernesto Hernandez) Seriously, who would have thought that this online platform could really spark such strong relationships? BUT IT DOES! We cannot credit BP enough. You want to be successful? NETWORK!

#2: I hit some pretty low points in my investing journey (vacant property, squatter, trashed unit needing $16k in repairs, horrible property management, more unexpected repairs on my newer units). And I will continue to hit low points (I got foundation issues to deal with now) as I continue down the road of real estate investing. BUT, these are all LEARNING points. Every negative has a positive.

#3: I added 83 units to my portfolio in the past 9 months. That's crazy to think about. I bought another single family, bought a duplex, and worked with @Sterling White on a 80-unit syndication.

#4: I am nowhere near "Financially Independent." This is a LONG game. I'm 2 years in. Let's chat in 20.

#5: I'm still continuing to learn each and every day. Books, Podcasts, and Meetups. Never stop.

Well, 2 years has gone fast. I'm excited for the future. Reach out if you have any questions, I'm always happy to help in any way possible.

-Tyler

[Son D.]

Hey @Tyler Jahnke

Great to see you made that syndication deal work!!! Last time we talked I thought you were just joining with other investors. I didn't realize you were the syndicator. You're moving way ahead, especially for someone in it for just 2 years. Congratulations.

[Matt K.]

Details on the syndication?

[Colin Zhu]

Great to hear @Tyler Jahnke ! Let me know next time you go to a Meetup around the Bay Area.

[Tyler Jahnke]

Hey @Son D. - I wasn't clear, I'm just a limited partner in the syndication. Not the syndicator. Maybe next time though :)

Happy Holidays man! We'll have to catch up again soon.

-Tyler

[Tyler Jahnke]

Hey @Matt K. - It's an 80-Unit in Louisville, Kentucky that we believe can be managed MUCH more efficiently. With better systems in place and the $1M+ we're putting into it, cash flow will increase as well as the property value. It's going to take time though to get these units turned over and rented. We don't expect to cash flow until July of 2019.

In 3-5 years we'll assess a refi or a sale.

Tyler

[Maria Heins]

@Tyler Jahnke , I just wanted to take a moment to tell you thank you for starting this thread two years ago and for sharing your story with this community. I just joined Bigger Pockets two days ago hoping to find information/reviews from Morris Invest clients and I stumbled upon your story. I've read the entire 30 pages! Again, thank you very much to you and everyone who contributed. I was extraordinarily close, within days, of doing my first ever investment real estate deal.... with Morris Invest. I believe this thread saved me a whole lot of struggle and financial hardship. 

Reading your story like this as a whole was incredibly inspiring. It was awesome going on the journey with you seeing it unfold, the ups and downs. I sure was rooting for you and incredibly happy you found huge success. 

Now that I know to steer clear of investing with MI, does anyone have recommendations for Turnkey providers for out of state investors? I would love to be hands on with my investment properties but I work overseas. For that reason, if I can find a reliable and trustworthy company, I believe turnkey is my best option for REI at this point in life.

Again, thank you for being generous in sharing your story, your optimistic attitude and hardworking antics, Tyler. Know that it continues to help people- like it just did me. Best of luck for your future!

-Maria

[Andrey Y.]

Originally posted by @Maria Heins:

@Tyler Jahnke , I just wanted to take a moment to tell you thank you for starting this thread two years ago and for sharing your story with this community. I just joined Bigger Pockets two days ago hoping to find information/reviews from Morris Invest clients and I stumbled upon your story. I've read the entire 30 pages! Again, thank you very much to you and everyone who contributed. I was extraordinarily close, within days, of doing my first ever investment real estate deal.... with Morris Invest. I believe this thread saved me a whole lot of struggle and financial hardship. 

Reading your story like this as a whole was incredibly inspiring. It was awesome going on the journey with you seeing it unfold, the ups and downs. I sure was rooting for you and incredibly happy you found huge success. 

Now that I know to steer clear of investing with MI, does anyone have recommendations for Turnkey providers for out of state investors? I would love to be hands on with my investment properties but I work overseas. For that reason, if I can find a reliable and trustworthy company, I believe turnkey is my best option for REI at this point in life.

Again, thank you for being generous in sharing your story, your optimistic attitude and hardworking antics, Tyler. Know that it continues to help people- like it just did me. Best of luck for your future!

-Maria

 Take a look at my thread detailing my own experience with a company that has sold houses to dozens of investors.

https://www.biggerpockets.com/forums/311/topics/65...

Would be another informative read for you. Feel free to comment there.

[Tyler Jahnke]

Hi @Maria Heins - THANK YOU for the kind words. And I’m glad you found my post valuable to you and other investors.

I started this post two years ago because I didn’t really know what I was doing. And I was scared. And I wanted accountability. I wanted a support system. And I wanted people to LEARN from my experience as a newbie investor. I Jumped In headfirst and it’s been quite the ride so far. 

I always thought that if I could help just ONE person through the process of investing my job would be done. But I’m realizing, I’m nowhere near done after personally speaking with dozens of new investors that are either just starting out and wanting to learn, investors that have property and trying to grow, or investors that are goIng through challenges due to bad decisions or lack of experience.

The idea of passive rental income pushes us to take big risks because it’s supposed to lead us to our dream lives. And it definitely CAN lead us to financial freedom. The concept is simple. But execution is a lot more intricate.

Best of luck on your journey. Let me know if you have any questions. And thank you again for the kind words!

-Tyler

[Devin Martin]

@Tyler Jahnke You my friend are a rock star, I learned a valuable lesson years ago investing in a gym, and have tried to never make the same mistake in real estate.  I fully echo @Maria Heins- and thank you.  @Jay Hinrichs I love your honesty through the entire 30 pages,  a hard pill for many to swallow but I get you my man, and would love to connect with you . After reading all this I just cant bring myself watch another Clayton video again.  

[Jay Hinrichs]

Originally posted by @Devin Martin:

@Tyler Jahnke You my friend are a rock star, I learned a valuable lesson years ago investing in a gym, and have tried to never make the same mistake in real estate.  I fully echo @Maria Heins- and thank you.  @Jay Hinrichs I love your honesty through the entire 30 pages,  a hard pill for many to swallow but I get you my man, and would love to connect with you . After reading all this I just cant bring myself watch another Clayton video again.  

Truly sad part for Clayton is he could have been one of the largest if not the largest re seller of turn key homes in America.. he still Is at it but man he really shot himself in the foot by not owning this stuff. and for sure he knew what was happening one cannot hide behind the fact that investors and anyone just doing a cursory drive by of a non rehabbed home that was suppose to be rehabbed.. 

any way.. should be interesting to see if he gets away scott free other than defending the multitude of lawsuits that are no doubt pending.   

[Will Zena]

@Jay Hinrichs In a recent Youtube live someone called them out on why he has an F rating on BBB. He got a little nervous and said it wasn't them it was another company and his lawyers are taking care of the issue. So still passing the blame. 

Now marketing B-, B level properties. 

[David Noh]

@Jay Hinrichs

I've spent the my entire afternoon yesterday reading this thread and your comments were on point.

It was incredible how you were able to predict this whole outcome from the start and it played out just as you said for the whole two years !

[Jay Hinrichs]

Originally posted by @David Noh:

@Jay Hinrichs

I've spent the my entire afternoon yesterday reading this thread and your comments were on point.

It was incredible how you were able to predict this whole outcome from the start and it played out just as you said for the whole two years !

well anyone with experience in the asset class and such could have came to the same conclusions.. they preyed on newer trusting investors .. who thought how could a TV star do me wrong..  

[David Noh]

@Jay Hinrichs 

It is definitely true. Coming from a software engineer background myself, I have peers and friends around me that are starting to get into RE (they are afraid of the stock market) and you know how the market is in Bay Area. The numbers are awful, ROI is awful and imagine if one of these fellows come across Morris Invest that promises you the convenience and net 12% return for just 40-50k which can be chump change if one saves correctly this area.

I've just listened to BP podcast episode 257 featuring David Greene who is a police officer in SF investing out of state. His strategy is to find the experts and rely on them while doing his due diligence in out of state markets. Work the 20% of the deal and let the others work the rest of 80%.

Do you personally follow the similar strategy of finding the team in a new area or do you personally like to take the helm yourself?

[Krishnan T.]

 M.I invest and his wife have started a "coaching system" to help people achieve their "financial dreams". This is crazy...they are now also into the financial wellness coaching space.

[NA NA]

Clayton has started a new gig.

https://financialfreedomacademy.com/

Eliminate money stress for life let him take all of yours then you won't have to worry about any money. Buyer beware

[Jose Angel dominguez]

Hello, Everyone, I read all this comments today and I found pretty good advice here especially when i heard you guys talking about Morris Invest.  I've been wholesaling properties and finally decide acquire rental properties In Indianapolis and Morries Investment sounded very convincing but after reading negative comments of them i'm not so sure now but I'll be doing  my research about Morries Invest.  I have a Property Under contract for $30,000 in Arsenal Heights Indianapolis but need repairs. Do any of you guys can give me advise of  Indianapolis areas?

[Tom Campone]

I dealt with Morris Invest on 3 deals and I'm just getting the mess cleaned up now on the last one. In some ways I'm not sure I would have been able to pull the trigger on my first deal without it being that easy but I definitely paid the price for "easy" on the back end. I can in no way suggest anyone does business with them or anyone they are associated with. I was on an investor email chain that they sent out by accident and some folks lost their shirt buying from Morris Invest. 

[Jeremy Z.]

Thanks for sharing your experience @Tom Campone. As an outside observer, I just hope all of the investors who were defrauded share their story so this mess gets more and more attention. It sounds like Morris is just continuing forward full steam ahead!

[Tom Campone]

@Jeremy Z. It sounds like they are still operating and his partners have switched shell companies. Stay tuned for more....

[NA NA]

It looks like the Financial Freedom Academy if for Clayton's financial freedom not ours.  LOL

[Steve K.]

Action in Indiana courts: suits moving forward, case files available on the court's website: https://public.courts.in.gov/mycase/#/vw/Search (enter Clayton Morris in the search).

Complaints state plaintiffs were deceived and harmed by Morris Invest. Purchase contracts were signed by Clayton Morris. Oceanpoint/Indy Jax was the true seller of the properties and also was later contracted to rent and manage them (or Blue Sky, Boardwalk, etc.). Buyers received the warranty deeds from Oceanpoint/Indy Jax conveying ownership despite contracts being with Clayton Morris and payments made to Morris Invest. There weren't any assignments.

Purchase agreements are available as exhibits and they are pretty bad: no seller info, no assignment, only Clayton's signature even though he was not the seller or a broker. The selling broker line is blank, real estate license # line is blank, legal description of property: blank, earnest money: $0, financing, inspection, insurance sections all blank (only parts filled out are sections that benefit the seller). Don't see how fraud gets any more fraudulent.

From reading the complaints (I just binged and read them all), plaintiffs allege that Clayton made oral/express contracts and presented marketing materials that promised his company would rehab the properties as included in the sale price but the properties were never rehabbed. Then months later he or his representatives told the plaintiffs that the properties had been rehabbed and rented to tenants when they were actually vacant and collecting fines from the city. Some plaintiffs received "rent checks" from tenants that were fictionalized and were also sent leases that were forged. Morris Invest videos are also referenced in the complaints as oral contracts and attempts to deceive/ induce fraud.

One complaint states that the Morris Invest house had actually burned down 4 days PRIOR TO CLOSING and that this wasn't disclosed to the buyer before closing or during the months after the sale. Only when the buyer received a letter with fines from the city saying the burned home would need to be demolished did they learn about the fire. The property managers put in place by Morris had been withholding previous letters from the city and assuring the buyer everything was going according to plan.

Opening up the documents in the case file I saw that on 3/11 a motion to dismiss was granted to Oceanpoint in one of the suits because Oceanpoint doesn't appear on the contract. All other motions to dismiss have been denied or are still pending. The one that was granted states only Oceanpoint is dismissed, not the other defendants (Clayton Morris, Morris Invest plus reps and agents for MI named personally). So it's looking like CM's having a hard time shedding blame with his signature on the contracts and his face in the videos promising turnkey investments that ended up being vacant economically obsolete or literally burned down houses.

I don't know any of these people or have any involvement or inside knowledge, just going off what I have read on here, watched on the Morris Invest youtube channel, and now read in the case files.

The different suits vary by case but allegations include many counts of fraud, fraud in the inducement, breach of contract, promissory-estoppel, quantum meriut and unjust enrichment, business opportunity deception, and offense against property. Jury trials have been requested.

I'm actually surprised there aren't more suits because we know there are several hundred victims (and counting) and I could only find a handful of suits. Perhaps more lawsuits are in the works, or a class action? Perhaps some suits have already been dismissed/settled out of court and these ones will be too? I have no idea. If a criminal case isn't also underway I'll lose all faith in the justice system.

I also looked up the property where the summons/subpoena was sent to (also listed as the main defendant's address in the complaints): a 6,500ft2 residence in NJ. It is currently listed for sale for $1.5M. It's a nice house, I recognize it from the youtube videos. I'm guessing this is asset protection, selling before the house gets taken. Or maybe he's upgrading, I wouldn't be surprised by anything at this point. He's still posting new videos every few days so doesn't seem to be slowing down... the very sad saga continues... when will it end?

[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.

[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.