Morris Invest Case Study 3.0

[Gregory Washington]

I was inspired by Tyler jahnke to do an honest case study for evertone about my experience with Morris Invest

[Tom Ott]

Originally posted by @Mike D'Arrigo:

@Ryan E. You're absolutely right that one person's B class can be another person's D class. I see this all the time. As I was saying, by understanding the prices and rents in an area, you will avoid this. I am always baffled when unsuspecting investors buy a $40K property that rents for $600/mth and is convinced that it's a C class neighborhood because the seller told them it was. As an out of state investor, you should always ask the turn key company what their criteria for classification is. They should be able to give you a well thought out, logical criteria that considers the following:

• Income levels
• Crime rates
• Owner occupancy/rental rates
• Home sizes (3Br 1Ba vs 3Br 2Ba etc)
• Median home prices
• Median rents
• Proximity to anchor retail stores

 I agree with all of this. You can't say the only want to know a neighborhood is to live there. If that was the case, then we would never have any out of state investing, or at least everyone would be very nervous. There are many factors that lead someone to believe what kind of neighborhood it is. That is one reason the letter class system doesn't work in general. Sometimes a C neighborhood could have a B class street or the other way around! It is very hard to tell. I guess the best is just see what all of the resources say about that particular area/street and see if it is enough to make you feel comfortable enough to invest!

Good luck to everyone in this forum!

[Matt K.]

Originally posted by @Ryan E.:

@Mike D'Arrigo that’s a good point and I’m not trying to lump them all in and say they are all bad. The problem is that one company’s “B+” neighborhood might be a D+ to me. Verifying isn’t always as simple as pulling up google maps, doing a bunch of online research, or even visiting the market. To really know a market you have to live there, work there, or have people you can trust. At some point consumers of this product have to place a lot of trust in the provider is all I’m getting at and referrals help a lot....If someone like Jay Hinrichs told me the provider is or isn’t good to go then enough said. 

 You absolutely don't have to live in an area to understand it well enough to invest. It'll take time, but again use KC as an example... it's extremely well documented online and here to be more specific. Down to the zip code you can get info on what's "good" and "bad". Then you can go on zillow, hotpads, craigslist, and a PM site to determine what rents go for. If you study it long enough (and to be honest study probably is right word, more like monitor) you'll start seeing what things get rented and what stays vacant. Then you couple that with info discussed elsewhere you can make a really solid strategic to target a specific area. 

At a certain point you'll have to visit the area and get a feel for the area and that can't be done in a weekend. Stay in an AirBnB and pretend you've just moved.... this will help you understand what you've researched previously.  You can also do the reverse and visit then research, but you're still going to need to make a few trips.

Also, it's easiest if you focus on a specific area (maybe that's a zip-code or even neighborhood) and then grow out. As you grow out, start networking. Use those local people to ask questions, but really you're confirming what you've already observed. Then if they have the same standards/definitions as you branch out farther, have them show you where they like etc. Do this with a Realtor or PM and that's how you can build a team easily based on referrals. 

For the areas I invest in I can tell you who'd rent for me, what they rent, how much they'd pay, why they want to live in this area. I can tell you where they go to work, eat, school, or what's going locally. It's easy now, because I monitor it much the same as I do where I live, but it did take work to get here. 

[Matt K.]

@Ryan E.

a little teaser (link in that thread has more detailed info)

https://www.biggerpockets.com/forums/48/topics/445...

http://kcrag.com/index.php

http://www.city-data.com/forum/kansas-city/

https://factfinder.census.gov/faces/nav/jsf/pages/...

then if you want to pay for data you got stuff like neighborhoodscout, rentfax, mashadvsior, house canary....

[Ryan E.]

@Tom Ott I said live there or have boots on the ground you trust....which is what people are doing with Turnkey, the majority of whom probably are very nervous lol at least until they build a track record of success. 

In my market I know the area’s better than most people but I don’t know them well enough to know if a particular street borders a terrible area for example. But yes, at the end of the day investors have to do their due diligence and pull the trigger. Some of the bad rap that good TK providers get is probably from investors who didn’t do their due diligence and had a different idea about the neighborhood classification system than what was in the provider’s head. 

[Ryan E.]

Originally posted by @Matt K.:

@Ryan E.

a little teaser (link in that thread has more detailed info)

https://www.biggerpockets.com/forums/48/topics/445...

http://kcrag.com/index.php

http://www.city-data.com/forum/kansas-city/

https://factfinder.census.gov/faces/nav/jsf/pages/...

then if you want to pay for data you got stuff like neighborhoodscout, rentfax, mashadvsior, house canary....

Awesome resources and really good posts, Matt. I appreciate it! And the level of due diligence you describe is what every investor should do. Unfortunately most (me included) want to just trust and move forward. Your way is better though. 

[Jay Hinrichs]

@Matt K. all I know is in KC Jackstacks has "A" class prime rib bones end of discussion.. :) I like KC a lot and Indy.. both of those cities in the right spots are nice investment cities for moderate prices SFR's

I just moved into the Cleveland market and I like some of the out lying suburbs there as well. although one has to be cognizant of tax's there..

Bottom line kind of how I would look at it is very simple.

what is the median price point in the MSA

so for PDX we are at about 350 is maybe closer to 400k right now..   so if I was looking at a 150k home I would think that's the worse area of town and the toughest to manage.

if its was a 750k house I would think great house great place upper management tenant.

If I was looking at say Indy with its about 150k median  I would think

40 to 50k is the worse or cheapest and toughest to manage and I would think 100k is much better and 150 and above great.. 

as a General rule and I STOLE this from Chris Clothier but he makes some great point about gross rents.

a 600 dollar tenant needs 3x to qualify  that's 1800 a month - 600 ( rent) - 200 utls = no more than 1000 a month to live on.. cutting it pretty close probably has little to no savings and stability could be a challenge

Now lets look at a 1200 dollar rent.. 3X 3600 a month - 1200 = 2400 - 200 = 2200 a month over double the amount of money to live on per month .. gas is the same food is the same .. cell phone is the same so who is more stable.. ???? Ergo in my mind 600 a month better be 2 and 1 bd apartments that you can turn over for 500 bucks and people are in and out of them.. when its a SFR that's a bigger turn over number bigger vacancy number and much higher capex.. plus not enough gross revenue to pay for cap ex over time.

So that's some other angles to look at it

[Matt K.]

@Jay Hinrichs and the Intercontinental on the plaza if you book a room w/ lounge access, it's a self serve happy hour w/ complimentary liquor/beer/wine lol.... which is also walking distance to Jackstacks haha.

[Eric M.]

@Gregory Washington,

Any updates to your journey? Can you describe your experience with Oceanpointe (they closed down, right?)

[Gregory Washington]

So far so good! Rent checks have remained on time and steady. As far as the rumors surrounding Oceanpointe, I haven't heard anything of the sort. My check continue to be facilitated by them.

[Caleb Heimsoth]

Gurpreet Bhinder this is a good thread to read to answer your question, there are several older ones just like this that you can also read, if you can find them.

[Son D.]

i just got a post rehab inspection on my property last week. Here is the video. https://youtu.be/_jn6G6cZsdE

[Steve K.]

@Gregory Washington   have you had your property inspected and verified that it was rehabbed well and that it is rented and verified the lease and the actual rent are the same etc.?

[Jay Hinrichs]

@Steve K.  some of the indy morris investors are reporting getting rent checks when their houses are sitting there vacant and trashed...

so I would think this OP would want to have a realtor go do a BPO for him pay 100.00 have a reputable 3rd party broker go take pictures do comps and knock on the door of the home and or the neighbors neighbors will know if its rented or not.

[Steve K.]

@Jay Hinrichs good advice. Meanwhile Clayton Morris is still doing his podcast, attracting new investors...

[Tyler Jahnke]

@Son D. - Tough to watch your "post" rehab video. Unfortunately, that's the condition of most of the Morris Invest properties I've seen. I wish you the best of luck in getting through this!

-Tyler

[JD Martin]

Originally posted by @Son D.:

i just got a post rehab inspection on my property last week. Here is the video. https://youtu.be/_jn6G6cZsdE

 I'm confused. In those pictures it looks like someone is living there. Is that a video of the house after a rehab has been done and the new tenants have moved in? If so, yeah there's some really sad work done/not done in that video. 

[Son D.]

@JD Martin yes it is rented. There were a few more pictures that I did not put in that video because it showed their faces. It was more of the same. I've also been requesting a copy of the lease since mid February and have yet to receive it.

@Tyler Jahnke I don't know how you were able to turn your property around. Maybe you were smarter than me and came over there during the rehab stage so they actually did it properly whereas I planned to go after.

[JD Martin]

Wow. OK I'm not saying you should expect the Taj Mahal but some of what was in that video should not have been left that way before people moved in. 

[Son D.]

As promised here is the video on the inspection report

[Todd Burton]

We have seen multiple Morris/Oceanpointe properties where the owner was collecting rent and the property was either vacant or the tenant was paying less than the amount being paid to the owner. I agree with Jay and would highly recommend you have someone check it out. There is a lot of potential liability as some insurance policies will not cover you if something happens and the property is actually vacant. A vacant property is also more likely to be a victim of theft or vandalism and is an invitation for illicit activity. 

[Jay Hinrichs]

Originally posted by @Todd Burton:

We have seen multiple Morris/Oceanpointe properties where the owner was collecting rent and the property was either vacant or the tenant was paying less than the amount being paid to the owner. I agree with Jay and would highly recommend you have someone check it out. There is a lot of potential liability as some insurance policies will not cover you if something happens and the property is actually vacant. A vacant property is also more likely to be a victim of theft or vandalism and is an invitation for illicit activity. 

One thing I don't see any of these folks talking about is:

Sewer scopes.. you know these companies are just doing what ever it takes to do the minimum.. and as a PM you probably know the number one issue with a rental is a backed up sewer.

these folks should all be doing a sewer scope and replacing the waste line if its not new already... this will give them years of trouble free issues..

[Son D.]

If a property management company rents a turnkey out and does not inform the owner of the rent,lease agreement and who it is rented to , would that be illegal? If not,Could'nt property managment companies misuse the trust and rent a place out and not tell the owner ? What type of legal action can be taken against such companies , where to start from?

[Larry Fried]

Originally posted by @Son D.:

As promised here is the video on the inspection report

 Apparently that video and utube account have been terminated.  So the video is not available....hmmm?

[Son D.]

@Larry Fried I was sending the videos to everyone I thought may be investing with them. Someone reported the account for spamming so youtube suspended the account and took the videos down. I've reuploaded them here

[Colin Zhu]

@Son D. is your PM company with Oceanpointe/Boardwalk or Blue Sky?

I'm also scheduling for my own inspector to go out there during rehab to try and catch things early.