After reading through the other long threads on Morris Invest and this one, I feel compelled to share my experience with Clayton Morris's operation in Indy as it might save some folks time and cash. I'm embarrassed to admit I actually hopped on a plane from San Francisco after work one night last month gleeful at the chance to buy a turnkey for 40k that was worth 50-55k (what Clayton talked to me about as the usual scenario)! If this were true, hell... I could simply buy properties with cash from my HELOC, turn around and do cash-out-refis, pay off the HELOC, rinse and repeat---I would achieve my "freedom number" in no time, and have none of my own money in the deals! Who needs the BRRR method when you could have it turnkey? So I took the red-eye to Indy, and spent a day with Clayton's acquisition manager, Bert Whalen, and Bert's wife, Natalie (the property manager for the whole operation). They were both charming and hospitable--I had a blast talking shop with the big boys/girls! I got to see a slice of the action from the heart of the team, a man whose been doing this for 25 years. I learned he's got 15 or so crews going simultaneously, fixing up mostly "C" properties in Indy--what appeared to be a serious flipping operation. He was closing on a 60 deal transaction with a foreign investor that day--wow--I was pumped to see these places! And then I saw them...
I asked to see properties pre-flip, mid-flip, post-flip, and post-tenant/vacated. The pre-flips were as I expected, total horror shows (ceilings falling in and feces on the floor, pit bulls loose in the back, etc.). The mid-flips looked like they needed quite a bit of work still--it was really hard to tell what they would look like finished. It was the post-flips/post tenant properties where I was truly taken aback. They weren't the fully gutted/rehabbed properties Clayton so often talks about (and has a video of on his Facebook page of) on his podcast with his incredibly reasonable sounding and soothing voice. Where were the new roofs, new kitchens, new floors, new plumbing, new electrical, new HVACs? No where around me. They were cosmetic dust-overs at best. One property I was shown had obvious structural damage on the porch (the cement was buckled in and up). Another post-tenant property had multiple holes in the walls and the entire tub/shower insert was falling out. I was so shocked in fact I was speechless, as the PM toured me around. At one point I decided to take a risk and do a mini-challenge of the "rehab" I was witnessing. We were walking over new flooring in a renovated kitchen when I felt several big holes under my feet. They were so noticeable In fact, I could see the impressions of divets through the new linoleum or whatever it was I was walking on. I asked the PM about the holes, and what she said will always stay with me.
"We do the minimum. We try and preserve the investor's money."
Visions of Slumdog Millionaire shot through my mind. What the hell was I doing there? Is this the kind of property I wanted to invest in? Is this the kind of landlord I wanted to be?
I won't go on with the novel, but he are some other red flags:
1) When I showed up to the acquisition manager's house, his wife was running late as she was coming from two eviction hearings at court that morning.
2) At one point on the tour, a young man dressed in stereotypical ghetto ware approached both the PM and Myself in front of a house (I wasn't sure if he was going to try and sell us drugs or what) and said that we didn't look like we belonged in the neighborhood and "are you guys investors?". We told him yes and he proceeded to give out his number as a potential "bird-dogger" if we were interested. I asked him what he thought of the neighborhood--he told me he wouldn't let his 2yr old daughter come through it.
3) One of the mid-flips we visited turned out to be a robbery in progress (the PM astutely noted that previous work that had been completed was now just about undone by neighborhood thugs--she had to call her construction team to get on the scene)
4) Upon leaving Indy, I told Clayton and his team I was interested in only his B properties (none of which I got to see) and could they send me some to look at. Apparently Bert sent Clayton 2 for me to look at, one of which was "sold" In less than 24 hours, the other of which didn't fit my criteria--I haven't heard from them again and it's been almost a month.
I hope this adds to the conversation and gives pause to other newbie investors such as myself.
