Morris invest - any insights?
Rental Property Investor · Oakland, CA · Member since 2016 · 268 posts · 106 votes
Morris invest - any insights?
Most Popular Reply
Clayton MobleyPro Member
Birmingham, AL · Member since 2014 · 875 posts · 947 votesAs the CEO of a turnkey outfit in Birmingham and an experienced buy-and-hold investor, I have to agree with basically all of @Jay Hinrichs' points. If a company is selling rehabbed properties for $40k, then they bought them for around 5-10k, meaning these are C class properties at best. More likely you have some seriously distressed D properties in undesirable neighborhoods, because the sale price has to include a profit margin for these guys, the original seller and the rehab crew. So, no matter how nice the properties look now, no one that can afford to live elsewhere will pay to live in those neighborhoods. You could rehab something to look like the White House and never rent it for a decent amount because the amount of crime in the area (not to mention the condition of the surrounding properties) will deter anyone who has the financial ability to be even remotely choosy about where they live.
Which leads us to the issue of equity. I see a lot of people talking here about buying below market to get some built-in equity right off the bat, but equity only truly exists when you sell the property - until then it's just 'expected' value. It doesn't matter how much money has gone into a property if you can't sell it. Put 30, 40, even 50k into a distressed property, it won't matter because no one will pay 40-60k to live in the type of neighborhood where you can buy a 5k property to fix up. If you hold a property for a few decades and the area magically gentrifies into the next hot neighborhood, then great, but that's a miiiiighty big bet to make. Appreciation isn't even guaranteed in A and B class areas, so relying on the possibility of appreciation in lower-tier neighborhoods is very risky.
And regarding the issue of financing, I think that bears a little more scrutiny. Yes, cash is faster and easier, and it does seem that a lot of new investors looking for the next hot deal are keeping this new outfit busy....but when the question 'why do you not work with financing?' receives the answer 'because it's faster and also we don't want to deal with bank red tape like appraisals', I think it's time to dig deeper. Appraisals are important for a number of reason, not least of which because they ensure that the investors knows the value of what they are buying - at least on paper (see my comment above about 'expected' equity on properties with no real resale value). I would hope that this company is encouraging prospective clients to engage the services of a third party appraiser, rather than brushing off the necessity of an appraisal as an unnecessary annoyance.
On the one hand, I'd like to say this is a new outfit that just has more business than they expected. Real estate investing - and turnkey and wholesaling in particular - gets a bad wrap sometimes so we all tend to be a little bit 'on the lookout' for scammers, which is unfortunate. So I'd really like to hope that these guys are as legit as some of the posts here indicate because I like to think that we, as an industry, are learning to separate the wheat from the chaff, leaving only the well-intentioned professionals. Indy can be a great market, and a wholesale-cum-turnkey operation is an inventive model, so I'd like to think these guys are just a little avant-garde. However, I've also seen a lot of posts mentioning how difficult it is to contact them, or to schedule even a simple call in a normal time frame. The fact that the site has little information and that one person wasn't even sure if the guy on the phone was the guy from podcasts gives me pause. A few people have mentioned that it 'seems maybe too good to be true' and, in my experience, that usually means it is. It sounds a little like these guys just want people with cash on hand who will pull the trigger without a lot of questions or checking-in. Whether this is by design or because they are overwhelmed by their own success remains to be seen.
HOWEVER, for those that have spoken to the company and felt that they were on the level, I would say follow your gut but be very sure you take responsibility for doing your own due diligence. Ask them to show you exactly what their ROI numbers are. Ask for a real-world example of their returns on a property similar to the one you are considering. Not with an estimated 40% expense rate, but with the actual expenses incurred for the last year (or however long they've been operating). Don't lump all the costs together, ask for specific expense rates, occupancy, maintenance, move out costs, etc. They should be willing and able to provide these hard figures and they should be happy to walk you through how they add up. Questions from first time investors should never be met with 'tuning out' as one person put it with regard to their mention of financing. Even if they are really busy, an investor with questions, who wants to be educated about their decision, is not an inconvenience and shouldn't be treated as such. If you get the information and the treatment that you deserve and feel confident in the product, then go for it!
Sorry for the ramble ;) Having just read this whole thread, it seemed Jay was a little on his own out there and another experienced perspective might be useful. Take it as you will, and good luck to all in whatever investment niche you choose!
All the best,
Clayton
414 Replies
- Indianapolis, IN · Member since 2013 · 549 posts · 310 votes10y
Local Indy investor here that knows most of the turnkey operators here in town who carry a good name and stand by their product. Happy to share my insights with you...feel free to reach out via PM or e-mail me. Welcome to Indy!
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Gerenser what price points are they selling their product at no information on the website ( which is always a little scary LOL)...
PS I lived at Silverado CC for a decade one of the great places in the US to call home ....!
- 10yRobert LindsleyPro MemberReal Estate Investor · Orlando, FL · Member since 2016 · 185 posts · 53 votes
I spoke with Clayton Morris last week. He was really forthcoming and answered all my questions. He is clearly really passionate about this business.
Here's what I found out:
- He operates exclusively in Indianapolis
- He's selling/rehabbing around 15 properties per month
- From what I could gather, he prefers cash because it's faster and doesn't have all the bank-financed red-tape (inspections, appraisals, etc)
- He makes money by essentially being a wholesaler -- his team identifies the property and he sells it to investors. At that point he brings in his crew for the rehab. When the rehab is completed you take ownership and he recommends a Property Management company -- you can choose to use them or not.A few hours after we finished our conversation Clayton sent me a duplex that was available. I asked if he had an SFR available and he sent that over to me as well. I ran the numbers on the SFR which came out to between 12%-20% return depending on expenses. When running numbers Clayton recommends taking out 40% of the monthly rent for expenses, which nets 12%.
I also asked if I could see a blank Purchase Agreement and the Property Manager's information; both of which he provided straight away. The PA is the standard Indiana Realtor's Agreement.
I spoke with the Property Manager (Natalie) today and her and the company are amazing. They focus on one area of Indianapolis called Center Township where they manage 300+ properties. They are a full-service Property Management company, taking care of everything. Natalie followed-up via email with all the forms they use for investors and tenants.
I have one last thing I need to figure out and that's how the purchase price compares with other comps in the area. I'd like to buy a property somewhat below-market so I have some extra equity going in. But if I'm getting 12%-20%, maybe day-of-purchase equity isn't the most important thing??? Looking for some thoughts on that one.
At this point I couldn't be more impressed with the operation. Once I figure out the comps I'll most likely make a move.
If you have any questions feel free to ask and I'll answer them if I can.
Thanks,
Robert. - Investor · Napa, CA · Member since 2016 · 19 posts · 5 votes10y
@Jay Hinrichs the price point he talks about is 40K+/- rehabbed. Silverado is great...was in Tahoe this year but usually catch the 3rd of July fireworks...always a great show.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Gerenser YUP used to take my golf cart over and lay on the law and watch the fire works ,, I lived in the Silverado Springs the first development on the right.
word of caution for 40k all in rentals in any area of the mid west in a big city.. you should do a little more reading on those price points they are attractive going in .. but a bear in the long run.
I know I owned 350 of those bad boys at one time.. LOL.
- Investor · Napa, CA · Member since 2016 · 19 posts · 5 votes10y
@Jay Hinrichs what should I be on the lookout for? At that price point, the home is paying for itself relatively quickly. What factors can make them a bear? I mean, I understand that if there are issues with vacancies, damage, etc, but sounds like there may be other factors that I'm not thinking of?
- Santa Clara, CA · Member since 2016 · 27 posts · 30 votes10y
I had a call with morrisinvest yesterday. The person on the other side of the call didn't sound anywhere close to how Clayton sounds on his podcast. But he said he was Clayton. It's a minor thing. He sounded pretty tired. Looks like he is very busy now. When I booked a call with him, there was a waiting period of 1 month. Now, the first available slot is in last week of Oct. So, I won't expect him to call everyone throughout the day and everyday.
The process is, when we are ready to buy, they will send out some listings to us. He stressed that the listings will go very quickly. He repeated that many times. They will take care of everything about buying - closing, Title, Insurance ($450 per year), Property Management (10%). He said none of his clients had any evictions, some of their leases have 2 years, they also rented out to doctors, nurses, they have clients from everywhere around the world, have good contacts with local judges incase anything comes up. He sent me info about how to open LLC in Indiana and his property management contact to use them on LLC as a local person contact. $40K is usually the price of the home after rehab. Currently only doing in Indianapolis. They might goto other markets in 2018.
The only contact I have is via email. Hopefully I could call back on the number I received on my phone yesterday. I am still figuring out my LLC issues before jumping to invest with them. I am a first time investor. I replied to his email asking couple more questions, waiting for his reply. I'll be surprised if I get a reply based on how busy they are now.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Gerenser this topic is well discussed on BP.
however when you buy in a major mid west metro area and your all in cost is 40k
another words home has been bought rehabbed and profit for the vendor .. on its face your buying in the worst neighborhoods in town.. and as such you draw the worst tenants and it tends to be rookie out of state landlords that end up with these only to find out in a year or two that your cash flow is not anything like your expecting ... when ever buying in these markets you want to buy at the high end IE 70 to 100k were your renters are SO" much better and your chances of success go way up.
remember an all in 40k home has been bought for 5 to 10k.. and those homes are in the war zones and worse neighborhoods it just stands to reason.. everyone I have seen on this thread is a first time buyer looking at the cheapest thing possible
If you want to go 40k type homes you need to do those in smaller towns out of the urban core they will have separate challenges but theft and war zone won't be one of them
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Sagar S. NO evictions that's just not true in that area and price point unless you are just starting and only have a couple homes.. JUST not possible... and I can assure you in those areas there are no doctors renting these... Nurses sure I had plenty of nurses as well.
- Investor · Bentonville, AR · Member since 2014 · 759 posts · 379 votes10y
For those paying cash I would recommend a third party appraisal to know if you are really gaining any equity in these purchases or over paying based on comps in the area.
That would be my assumption why they don't like financing in general.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Zach Quick one reason these sell for cash is its virtually impossible to get such small loans
IE 25 to 30% down on a 40k purchase price leaves a loan for 30k ish.... not many mortgage companies are keen on writing those types of loans they are losers .. vis a vi what they can make and charge on them...
- Investor · Denver, CO · Member since 2015 · 15 posts · 8 votes10y
chris
I am a new out of state investor and recently went to Indianapolis to meet TK providers that I had been researching. I was very impressed with PARC Property Group and LeeSmithRealty.com
Happy to discuss further. UC with one house with Parc now.
"If anyone has worked with other turnkey operations in Indianapolis, I would be interested in hearing about your experiences with them."
- Investor · Brielle, NJ · Member since 2015 · 121 posts · 21 votes10y
I have 2 houses with PARC and 2 more under contract and have been thoroughly impressed with their group
- Investor · Napa, CA · Member since 2016 · 19 posts · 5 votes10yThank you - I'll check out PARC
- Investor · Napa, CA · Member since 2016 · 19 posts · 5 votes10yJay Hinrichs you certainly make some good points here. Do you have suggestions on markets and Tk providers that are in that next step up with comparable ROI? I was sent a property that is 40k with $675 rent.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Gerenser just go on to our site turnkey reviews you will see 80 % or better of all the turn key operators in the US and their inventory.. from the lower tiered properties to properties that are 150k and up you can make side by side comparisons.. that tool is great..
in 30 minutes you can literally shop the whole country.. you can compare INDY to KC to Bham to Orlando etc etc.
Also Brie does some great Podcast with many BP folks that are OWNERS of turn key so you are getting feedback from actual owners on their exeprinces in real time with these assets.
- 10yClayton MobleyPro MemberBirmingham, AL · Member since 2014 · 875 posts · 947 votes
As the CEO of a turnkey outfit in Birmingham and an experienced buy-and-hold investor, I have to agree with basically all of @Jay Hinrichs' points. If a company is selling rehabbed properties for $40k, then they bought them for around 5-10k, meaning these are C class properties at best. More likely you have some seriously distressed D properties in undesirable neighborhoods, because the sale price has to include a profit margin for these guys, the original seller and the rehab crew. So, no matter how nice the properties look now, no one that can afford to live elsewhere will pay to live in those neighborhoods. You could rehab something to look like the White House and never rent it for a decent amount because the amount of crime in the area (not to mention the condition of the surrounding properties) will deter anyone who has the financial ability to be even remotely choosy about where they live.
Which leads us to the issue of equity. I see a lot of people talking here about buying below market to get some built-in equity right off the bat, but equity only truly exists when you sell the property - until then it's just 'expected' value. It doesn't matter how much money has gone into a property if you can't sell it. Put 30, 40, even 50k into a distressed property, it won't matter because no one will pay 40-60k to live in the type of neighborhood where you can buy a 5k property to fix up. If you hold a property for a few decades and the area magically gentrifies into the next hot neighborhood, then great, but that's a miiiiighty big bet to make. Appreciation isn't even guaranteed in A and B class areas, so relying on the possibility of appreciation in lower-tier neighborhoods is very risky.
And regarding the issue of financing, I think that bears a little more scrutiny. Yes, cash is faster and easier, and it does seem that a lot of new investors looking for the next hot deal are keeping this new outfit busy....but when the question 'why do you not work with financing?' receives the answer 'because it's faster and also we don't want to deal with bank red tape like appraisals', I think it's time to dig deeper. Appraisals are important for a number of reason, not least of which because they ensure that the investors knows the value of what they are buying - at least on paper (see my comment above about 'expected' equity on properties with no real resale value). I would hope that this company is encouraging prospective clients to engage the services of a third party appraiser, rather than brushing off the necessity of an appraisal as an unnecessary annoyance.
On the one hand, I'd like to say this is a new outfit that just has more business than they expected. Real estate investing - and turnkey and wholesaling in particular - gets a bad wrap sometimes so we all tend to be a little bit 'on the lookout' for scammers, which is unfortunate. So I'd really like to hope that these guys are as legit as some of the posts here indicate because I like to think that we, as an industry, are learning to separate the wheat from the chaff, leaving only the well-intentioned professionals. Indy can be a great market, and a wholesale-cum-turnkey operation is an inventive model, so I'd like to think these guys are just a little avant-garde. However, I've also seen a lot of posts mentioning how difficult it is to contact them, or to schedule even a simple call in a normal time frame. The fact that the site has little information and that one person wasn't even sure if the guy on the phone was the guy from podcasts gives me pause. A few people have mentioned that it 'seems maybe too good to be true' and, in my experience, that usually means it is. It sounds a little like these guys just want people with cash on hand who will pull the trigger without a lot of questions or checking-in. Whether this is by design or because they are overwhelmed by their own success remains to be seen.
HOWEVER, for those that have spoken to the company and felt that they were on the level, I would say follow your gut but be very sure you take responsibility for doing your own due diligence. Ask them to show you exactly what their ROI numbers are. Ask for a real-world example of their returns on a property similar to the one you are considering. Not with an estimated 40% expense rate, but with the actual expenses incurred for the last year (or however long they've been operating). Don't lump all the costs together, ask for specific expense rates, occupancy, maintenance, move out costs, etc. They should be willing and able to provide these hard figures and they should be happy to walk you through how they add up. Questions from first time investors should never be met with 'tuning out' as one person put it with regard to their mention of financing. Even if they are really busy, an investor with questions, who wants to be educated about their decision, is not an inconvenience and shouldn't be treated as such. If you get the information and the treatment that you deserve and feel confident in the product, then go for it!
Sorry for the ramble ;) Having just read this whole thread, it seemed Jay was a little on his own out there and another experienced perspective might be useful. Take it as you will, and good luck to all in whatever investment niche you choose!
All the best,
Clayton
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Robert Lindsley 10 to 15 a month I would need to see that.. there are very few operations that actually do that kind of volume in one city.. but not saying it could not happen but that's a ton of work you need 5 to 10 crews going non stop to pull that off.
low end duplex in Indy are fraught with danger.. both physical and economic.. I have had Australian clients of mine that I helped out of one in INdy.. after he had rehabbed it for the 3rd time in 2 years he finally sold it.. and lost a bundle.
You want to be uber careful at this price point.. and actually the only one's who should basically buy at this price point are locals.. out of areas investors run some pretty heavy risks vis a vi tenant base and neighborhoods.. I suspect if morrisinvest continues in this price point at anywhere the volume they are talking about this business will not be sustained more than a year or two.. their clients will suffer from the tenants etc.. and they will like most Rookie Turn key companies realize that playing in the lowest end sand box of a major metro area is financial not sustainable for their clients and ultimately themselves. You look at all the top providers in the space and NON of them will touch this stuff anymore. been there done that. there is one from Utah called Marquis homes google them.. the owners are being indicted.. they could not make it work at that price point in Indy and got in all sorts of trouble financial and it appears potentially criminal
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Jay Hinrichs:
@Chris Gerenser this topic is well discussed on BP.
everyone I have seen on this thread is a first time buyer looking at the cheapest thing possible
Jay -
I am sure you and I are the same in that we could not care any less about other companies and how they do their business. But, this point you made has really bothered me on this post. Every single commentator that gives a great review or says they are definitely buying has a few posts at best. They may actually be investors or just plants for the co., which unfortunately is a red flag that pops up because it has been done so many times here on BP. However, assuming all of the commentators are investors, man it should be a red flag that all are relatively new and all attracted to cheap.
Everything about this is classic NLP sales technique used to create an atmosphere where everyone feels they have to be a part of this now before all the good deals are gone. Very sparse website - scarcity - long queues - the product being hidden behind the curtain - lack of specifics - no phone number. These are all easy to see sales techniques designed to build a lot of smoke. That in itself is not always bad. Whether there is actually any real fire...who knows?
For all of the readers on here, I know nothing about this person nor this company. This is as much about advice at this price point as it is about a company. In my experience, you cannot - cannot make money on a turnkey product that you purchase for $40,000. There simply is not enough revenue in those deals to feed everyone and make them happy. That has been shown time and time again and as an investor and company owner who has operated in this industry for going on 13 years, investors lose money - sometimes all of their money - when they buy properties turnkey at this price point.
The ratio, over time, of collected rent that will be lost to expenses is 50% - 60%+. Do not fool yourself into thinking it will be 40%. IT WILL NOT. Not over time. Renters will be transient and there will be vacancies. A lot of vacancies and lots of extended vacancies. There will be a lot of maintenance and there will be lots of uncollected rent.
There is no magic to this. There is no neighborhood nor company nor management company that has figured out how to hold down costs, keep renters happy and settled and prevent maintenance ....AND keep costs at around $40,000. It does not happen in any city. You will have to pay the true cost of these properties at some point and that will come in the form of lost rent. Lost to unpaid rent collection. Lost to maintenance. Lost to management. You will lose 60% of collected rent when you buy houses at these prices. And notice that is just collected rent...that is what you will lose while the property is actually occupied.
There are always new strategies being developed to sell these cheap properties to investors. Why? Because CHEAP sells especially when you package it around NLP sales techniques. There are always new business plans being put together. The emphasis being NEW. There are exactly ZERO old strategies with companies who have been in the business for 10 plus years where their main strategy is to sell a $40,000 turnkey house. I am not aware of any investors who employ this strategy over a long period and make money buying cheap turnkey houses.
Just be cautious.
- Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes10y
I'm a new real estate investor, and these < 50k homes seem less and less like a valuable long-term strategy. I want something in a solid neighborhood, with good schools, that families will want to move into. A place I wouldn't mind moving my family to. The places Morris Invest has doesn't fit the bill for me (for someone else who's more experience and willing to take the risk, it might work out).
I've been familiar with Clayton Morris for quite some time, though. He and his wife are regulars across the tech podcast/news spectrum. In that area, they both have good reputations.
I did speak with him on the phone about a month and a half ago, before his business started growing (too?) fast. I made an appointment and was on the phone with him within a few days.
To me, it feels like his ability to harvest his personality and social/tech credentials has made his real estate business grow faster than he expected. I think he's an upstanding guy, just trying to figure out how to make his new turnkey business work after too much publicity, too fast.
Like I said, I generally don't like the idea of buying these ultra-low value homes. I'm looking at spending about 80k on a property and cash flow 200-300 a month. Ultimately, I'll have to spend more out of pocket on a twice as large downpayment, but if I can cash flow the same amount and have more long-term security in that property, I'd much rather do that.
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Jonathan Watson, I think that is a great post from you to be able to speak to someone's character. The word Turnkey has been beaten up and with good reason, because of people of, let's just say, questionable character. So I appreciate your post on his behalf. As an industry, we need strong, upstanding businessmen and women - and there are already a lot in this industry - but we need more. We need people who provide good, sustainable business models. As for this one, only time will tell, but history tells us making money in this business model will be tough no matter how you slice it. But, again, it is really good to have someone come on and speak for the character of the principle.
- Rental Property Investor · Oakland, CA · Member since 2016 · 268 posts · 106 votes10y
Thanks everyone for their thoughts so far. The only thing that is missing now is someone that has actually invested with them and can share some first hands experience.
@Chris Clothier I can guarantee you that I am a new investor and not related to morrisinvest in any way :-)
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Simon Stahl:
Thanks everyone for their thoughts so far. The only thing that is missing now is someone that has actually invested with them and can share some first hands experience.
@Chris Clothier I can guarantee you that I am a new investor and not related to morrisinvest in any way :-)
:) That is good to hear! Congratulations on taking such a smart step of getting on BP and vetting your options and asking questions. Whatever you decide as an investor, best of luck to you. I think all of us who have been on here for so long genuinely want investors to do well regardless of how they invest or who it is with!
And unfortunately, you'd be surprised the number of times companies send people to the site to pose for them and post good commentary. Glad to see you were able to humor my comment and not take offense ~ none was intended to any of the posters or even the company!
- 10yRobert LindsleyPro MemberReal Estate Investor · Orlando, FL · Member since 2016 · 185 posts · 53 votes
@Jay Hinrichs Thanks a ton for your thoughts on this! I've been looking for some perspective and I really appreciate yours. I've never purchased a buy & hold, let alone one that's a thousand miles away from where I live. I basically have $50k cash that I can invest, and this had seemed like a great option.
I'm assuming (probably incorrectly) that once I purchase the property, Morris is out of the picture and I'm working with the property management company. If the property manager can handle finding the right tenants and dealing with evictions, etc, wouldn't that plus a home warranty basically cover anything that may come up?
Also, I'm not sure about the area. If it's a B- or C+ I'd be ok investing there, but I definitely don't want to be investing in a war zone. I'm almost thinking I should take a trip out there to check out the neighborhoods!
Thanks again for all your thoughts and help with this!
Robert.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.