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

[Keith Weigand]

@Gregory Washington I read through your starting thread. To be honest, most of what you mentioned is not specific to Morris Invest. I run across many of the same issues with contractors, subs etc. I'm talking delayed responses, site is in disarray, subs not pulling correct permits etc. I'm not saying things couldn't be better. I'm just saying that these issues are not specific to Morris Invest. It's the construction industry. Also, I know many MDs/PAs that are sub 6 figures. (I use to own a medical software company). I don't know where they live but to think they are all rich and live in A+ communities is not true.

[Gregory Washington]

Update

10-9-17 - I emailed Nicole asking for any photos of the rehab. She responded that she only had a photo of when a tree fell on the property during the storm. (News to me). But she assured me that she would request any other photos there were. No response yet.

[Isaac S.]

@Gregory Washington - didn't you get a message saying there wasn't any storm damage?

[Gregory Washington]

Update!!!

November 2 I was told by the PM that the plumbing permit had been pulled, and the rehab is complete. The trash has been taken care of as well as all violations. And that they will be getting pictures for me as well. Some great news along with this is that the property is now rented!

November 3 - I was given an invoice of the deposit amount. (There was an $150 up front advertising fee) I was told that Usually within 3 to 5 business days  I'll received a direct deposit from Oceanpointe.

November 7 - Great news!!! I finally received my first rent check!!

This had been a journey but has paid off at the end. I would say if you do plan on going with MI, expect to wait 4 months after your purchase before you'll receive anything. Good to know. 

Funny because as soon as I received the check, we got a tax bill. Oh well!

[Caleb Heimsoth]

It’s threads like these that make me very skiddish about the idea of having a rehab done post close (me buying the property). I would gladly pay more To have the rehab done before closing, assuming I’m out of state.

There’s just so many potential issues that can arise. I’ve bought a property that is described here, but I didn’t do it through a turnkey company and I talked to multiple locals about the area before I bought it.

Long term I think paying more for properties is the way to go, as it leaves you Open to more options.

Finally, I’d say don’t settle for mediocre customer service. Unless they manage 1000s of units, it’s not hard to simply respond to an email, likely when it’s just a one question email. I use two different PMs and they always respond within 24 hours, sometimes within an hour.

One time recently, I emailed/called asking about an area that was I considering buying my next property in and just wanted to get their opinion. I got an initial response an hour later, saying he’d do some basic research and get back to me. I got that answer the following morning (which was a Saturday). That’s the kind of customer service you need and should expect.

[Jay Hinrichs]

@Caleb Heimsoth  well with Oceanpointe getting shut down by the AG its all anyway.

all these folks that bought now have to find a new manager and hopefully they will get their rent checks and such.. but as of Dec 18 oceanpointe was barred from doing any business in IN period.. can't collect rent can't do anything real estate related other than buy and sell for their own account . they cant work for others.. that's what the order called out..

[Ryan E.]

What I’m curious to know is if there are any reputable Turnkey companies that allow you to buy pre-rehab, maybe pay some kind of “wholesale fee” up front, and let you keep most of the equity created through the rehab? Then they get to keep your asset under management. They are rewarded and you get to circumvent one of the huge negatives of traditional Turnkey (no forced appreciation).

Jay Hinrichs I know you are very familiar with many operations out there, have you heard of this model? If I wasn’t so busy with the other things we have going on I’d compile a list or go through Brie’s TurkeyReviews website and start making phone calls. Maybe I’ll get around to that someday!

[Ryan E.]

@Jay Hinrichs please see above post. For some reason the tagging didn't work above. Thanks!

[Jay Hinrichs]

@Ryan E.  there are a few reputable companies that do as you describe... in full disclosure I fund them .. so I am no totally impartial.. but since I put up the money first .. I know they perform other wise I would not be giving them millions of dollars and being involved with something that becomes a train wreck and social media suicide..

[Ryan E.]

Thanks for the reply @Jay Hinrichs!!! 

[Rudy Ramirez]

Thank you for this information. I was seriously considering purchasing property from Morris Invest. After reading all of this, I’m definitely not going there.

[Tae C.]

Originally posted by @Jay Hinrichs:

@Ryan E.  there are a few reputable companies that do as you describe... in full disclosure I fund them .. so I am no totally impartial.. but since I put up the money first .. I know they perform other wise I would not be giving them millions of dollars and being involved with something that becomes a train wreck and social media suicide..

 Jay, any chance you could PM me some of those companies you mention?

[Jay Hinrichs]

Originally posted by @Tae C.:

Originally posted by @Jay Hinrichs:

@Ryan E.  there are a few reputable companies that do as you describe... in full disclosure I fund them .. so I am no totally impartial.. but since I put up the money first .. I know they perform other wise I would not be giving them millions of dollars and being involved with something that becomes a train wreck and social media suicide..

 Jay, any chance you could PM me some of those companies you mention?

 send me a pm

[Matt K.]

Originally posted by @Ryan E.:

What I’m curious to know is if there are any reputable Turnkey companies that allow you to buy pre-rehab, maybe pay some kind of “wholesale fee” up front, and let you keep most of the equity created through the rehab? Then they get to keep your asset under management. They are rewarded and you get to circumvent one of the huge negatives of traditional Turnkey (no forced appreciation).

Jay Hinrichs I know you are very familiar with many operations out there, have you heard of this model? If I wasn’t so busy with the other things we have going on I’d compile a list or go through Brie’s TurkeyReviews website and start making phone calls. Maybe I’ll get around to that someday!

You could find the house yourself and a good PM company.... and there's a decent chance that the PM company will act as Project Manager for you and help w/ the rehab. A lot of wholesale "deals" aren't all that great UNLESS you have a established connection w/ them. You can find "wholesale" level deals on MLS if you look hard enough.

[Ryan E.]

@Matt K. the issue with doing it myself is all the up front intensive labor....find the market, vet the team (property manager, agents, title company, attorney, contractors). Then you have to fill your pipeline with deals then manage the contractors etc etc. all while being out of state. 

Because of constraints with my current job what I'd be hoping to accomplish is leverage a trustworthy TK provider's network of allll those people, especially the contractors, and be able to purchase the property pre-rehab at a level where I have enough equitycould cash out refi at the end and get back a decent chunk of my money. Basically do the BRRRR process instead of pay retail for a property that possibly won't appreciate much. For me it doesn't even necessarily have to be a "Turnkey" provider. Some brokerage our outfit that offers what I describe would be awesome.

The trusworthiness of the provider is the most important here in my opinion, as this case study demonstrates there can be many pitfalls of TK investing. 

[Jay Hinrichs]

@Ryan E.  keep in mind this was NEVER turn key investing  from @tylerJenke first post.. about his trials and tribulations.. this was about selling low value assets and claiming they perform like high end turn key. according to the promotions I have seen.  @Matt K.  as we have seen and discussed the price points are too low to even allow for what a honest to gosh turnkey full reno .. many times my vendors I deal with will spend close to the amount these guys are selling houses for just in the RENO

when you have folks beleiveing they are getting a full rehab and its only 7 to 15k.. that in itself is the issue.. you can do bits and parts but not a full reno..  that will produce a long lasting property that won't need cap ex literally the day after you buy it.

[Matt K.]

Originally posted by @Ryan E.:

@Matt K. the issue with doing it myself is all the up front intensive labor....find the market, vet the team (property manager, agents, title company, attorney, contractors). Then you have to fill your pipeline with deals then manage the contractors etc etc. all while being out of state. 

Because of constraints with my current job what I'd be hoping to accomplish is leverage a trustworthy TK provider's network of allll those people, especially the contractors, and be able to purchase the property pre-rehab at a level where I have enough equitycould cash out refi at the end and get back a decent chunk of my money. Basically do the BRRRR process instead of pay retail for a property that possibly won't appreciate much. For me it doesn't even necessarily have to be a "Turnkey" provider. Some brokerage our outfit that offers what I describe would be awesome.

The trusworthiness of the provider is the most important here in my opinion, as this case study demonstrates there can be many pitfalls of TK investing. 

 I guess I should give some background on myself for a second... like you I was busy but wanted to invest. I almost went the TK route, but when I started doing a deep dive on the property I found the same skill set/time I was applying to someone else's evaluation as part of my due diligence I could just apply that on my own. I had no reason to trust the numbers I saw and wanted to verify they were at least close and not hypothetical numbers I'd never see.

So then I found a house, granted it didn't need anywhere near full reno, but it did get some updating to make it rent ready. I had the PM take this on as a Project Manager role, basically the same thing a TK company would do, but I picked the house. They got the bid, they managed the contractor, and I reviewed it/evaluated it and added/took off some things. Once it was rent ready they went back to being a regular property management company. I didn't have to really do anything other than ask some question about the bid...

But I will say this, at least in KC... finding a house for say 70% of market minus rehab costs is hard to do. A lot of "flippers" pay absurd prices and turn slim to none profit... and then run a tight rehab budget. Now with that said, you can get something that would need some updating and would give you a value add... and if you paid all cash and did delayed financing you'd get your money out. But if you did a loan then seasoned it probably wouldn't make sense after the fees/closing costs.

I guess long way of saying, if you get a good PM they can basically do most the TK stuff for you. You'd be able to in theory only vet them, then they'd give you referral to a realtor etc. 

[Matt K.]

@Jay Hinrichs I could never agree more w/ you that these low price points.  I should have clarified that my recommendation was for higher priced options. I think a lot of people forget that everyone involved in selling you that house has to make money somewhere (I mean it's the key point of being a business after all) and these low deals just don't have enough to keep honest people busy. 

[Ryan E.]

@Matt K. that’s great that you were able to do that! About a year and a half ago I was looking into TK but ultimately decided against for many of the reasons you say. What you did sounds a lot like David Greene’s book. 

I also agree with @Jay Hinrichs about these low price points. I guess the point I was trying to make was that Morris represents himself as TK and apparently offers junk in junk neighborhoods and I have zero doubt there’s plenty of other operators out there doing business in that way. Therein lies the rub....who to trust. 

[Matt K.]

Trust but verify. I think that's one the major issues... is people assume there's some kind of built in trust with a TK company that they'll automatically do the right thing. People also see a "estimated" pro forma that looks amazing, but it's unlikely to ever happen and they'd know that if they spent an hour researching it.

I'm curious though, all the TK I've found have always been in the rougher areas and lower price points. I've never really looked that hard, but are there any that offer higher priced options in say B+ or better areas?

[Jay Hinrichs]

@Ryan E.@Matt K.  Guys I think the common definition of turnkey preclude MOrris from being considered turn key .. from what we have gleaned he is a marketer.. like Maverick , and others that just market income producing mid west homes.. so do keep that in mind..

he may have been hood winked himself.. hopefully he was not totally aware of the product that was going out with his name on it..

[Mike D'Arrigo]

Originally posted by @Caleb Heimsoth:

It’s threads like these that make me very skiddish about the idea of having a rehab done post close (me buying the property). I would gladly pay more To have the rehab done before closing, assuming I’m out of state.

You should be more than skiddish about paying for rehab before closing. You should run.. The majority of the risk is in the rehab and by paying for it upfront, the buyer is taking on 100% of the risk. 

[Mike D'Arrigo]

Originally posted by @Ryan E.:

@Matt K. that’s great that you were able to do that! About a year and a half ago I was looking into TK but ultimately decided against for many of the reasons you say. What you did sounds a lot like David Greene’s book. 

I also agree with @Jay Hinrichs about these low price points. I guess the point I was trying to make was that Morris represents himself as TK and apparently offers junk in junk neighborhoods and I have zero doubt there’s plenty of other operators out there doing business in that way. Therein lies the rub....who to trust. 

There's also plenty of good ones that don't. It's not that hard to sort out the good from the bad. A turn key company that focuses on a higher asset class than ones that sell low end properties in the "hood" is a good place to start. The problem I see continuously is that some investors don't do their own due diligence on the neighborhoods and rely on what the turn key company tells them. Instead, they should familiarize themselves with market values and rents in the types of neighborhoods they want. If rents in a typical B class neighborhood are $900 and a TK company operates in areas that rent for $650, that should tell you what you need to know.

[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. 

[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