Morris invest - any insights?
Rental Property Investor · Oakland, CA · Member since 2016 · 268 posts · 106 votes
Morris invest - any insights?
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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
- Web Designer / Investor · Bellevue, WA · Member since 2016 · 2 posts · 7 votes10y
Originally posted by @Sreeraj P.:
Thanks, @Sreeraj, My expectations have been lowered, to say the least. Did not know about Larry - thx for sharing.
- Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes10y
I'm like many others here. I stumbled across MorrisInvest by accident and having never dabbled in any real estate other than my primary residences over my lifetime...I got the bug. I've listened to all his podcasts, scheduled a call for late Oct and have been inhaling all the books and BP for more information on B&H and passive income and how to find investment partners. Still very early stages and haven't actually spoken to anyone as of yet.
I also had very high hopes for MorrisInvest but just a little disillusioned after reading of the experiences.
As for those asking for Clayton (Morris) to chime in...he and his wife just had a new baby 3 days ago so they're probably a little preoccupied at the moment.
So big thanks to ALL here on BP for being so helpful....us newbies have a lot to learn and we appreciate your patience.
The good news is that while I'm over 50, I just read Rich Dad Poor Dad and gave it to my 20yr old son in college and he read the book in 2 days and the two of us are pumped to both getting started...luckily, he's young enough to have time to build up his investment experience with a lot of time....me..I'm running a sprint!
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Merritt Whitman @Dolores Waldron @Shane M.
It is unfortunate, but nothing you have posted about your visit is new or shocking. I know it is shocking for new investors and it is such a good thing to be posting these experiences. It only reinforces that investors MUST do their due diligence. No one is looking out for your money like you. I have said dozens of times that you can take nothing on faith. Not even what I say! Seriously, you must make anyone you do business with, especially in the turnkey world, EARN the right to be believed!
I have seen dozens of companies and many more than this one exist today, where the marketing has nothing to do with the reality. It is all about making money. It has nothing to do with the success of the investor. It has nothing to do with the integrity of the offer nor the company. It is all about making money. The entire success of the operation is based on selling properties to investors who will not take the time to get on a plane and look for themselves until after the transaction is completed. At that point, the money is transferred and the damage is done!
At one point I would have said this was simply a stay small keep it all type of operation and you always want to give the benefit of the doubt. You want to believe that they are just simply naive.
Lastly, to the quote about "we don't want to spend an investors money". This goes straight to the heart of why investors stay away from "cheap".
AN INVESTOR WILL SPEND A MINIMUM OF $2 -$4 OVER THE FIRST FEW YEARS OF OWNERSHIP FOR EVERY $1 THAT IS SKIPPED ON THE FRONT END RENOVATION!!!!
Write that down and remember it. Whether you are renovating yourself, hiring a contractor, buying Turnkey...it does not matter. If and when maintenance is deferred, it will cost an investor $2 minimum for every $1 they "save" on the front end. It is a disastrous policy and is used to "sell" investors and make the b.s. numbers on paper look better.
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Shane M.:
@Merritt Whitman- At best, the rehabs were mediocre and no where close to what Clayton Morris claims them to be. The flooring and paint job at one of the "rehabbed" properties was just not up to my basic standard of expectation. What also struck me as weird were 'for sale by motivated seller' signs outside each of their properties and they wouldn't answer why the signs were placed. I will continue listening to his podcasts but will never invest with him.
It just keeps getting worse. It seems like every single red flag that many of us in the industry talk about comes up with this company.
It could be that the signs are posted because they are not selling their properties. They may not own what they are selling.
It could be that the properties are actually owned by the renovation company. In that case, this would be a really bad case of partnering for profit. One person can find all the cheap, crap properties that the other can sell and do little to no renovation on them to save money. The other person uses their reach and often notariety to bring in the investors and sell the properties. The two partners split the profit on each deal and move on to the next investor.
That could be the case here based on what you saw.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Clothier ounce of prevention = 2 lbs of cure.
If anyone reading this thread still thinks 40k turn key in ANY major metro area in the US is a good idea.. based on expert's chiming in ( which of course we all have some bias myself included) but we have numerous first time investors spending their time money etc to check out the operation and are reporting back.
it has to be REALLY bad for people to get on BP and detail these trips like this.. Most folks just would not comment.. and move on.. the fact that these folks who are a slice of the investing public have come on BP and made these observations.. then we are just skimming the surface.. in my humble opinion it simply is not scalable and these folks will be like most others in the space.. long gone and their investors left to hold the bag.. I predict some epic financial loss's coming.. Again personal opinion.
- Corte Madera, CA · Member since 2016 · 24 posts · 44 votes10y
@Chris Clothier You hit the nail on the head, Chris! I've received private messages from local RE professionals in the Indianapolis Community after my original post (on the other thread) describing exactly what you laid out as the possible explanation for this fiasco. They know the players involved and of their less than stellar reputations within the community--the remarks were quite damming. Any insight on why such a well-liked public persona would put at risk their personal reputation by proceeding in such a fashion? I would think there might be easier ways for someone with such notoriety to make money being a straight-shooter in RE and "leave a legacy" for his/her family.
- Corte Madera, CA · Member since 2016 · 24 posts · 44 votes10y
@Jay Hinrichs I have more "surface to skim"--just had another near miss with another supposedly reputable turnkey provider in the Indy market--love to get your input as well as @Chris Clothier's on how I could have done it differently. I'll start another thread...perhaps "Evolution of a Sucker"? Lol.
- Rental Property Investor · Indianapolis, IN · Member since 2016 · 200 posts · 87 votes10y
Instead of trying to buy through turnkey where they overcharge just get on the list of some of the better wholesalers here in Indy like Brett Snodgrass.
The drawback is you would have to hire a contractor to fix them but you will get a lot of meat on the bone that way.
- Modesto, CA · Member since 2016 · 38 posts · 26 votes10y
Originally posted by @Chris Clothier:
@Merritt Whitman @Dolores Waldron @Shane M.
... I have said dozens of times that you can take nothing on faith. Not even what I say
But Chris... If we can't believe you, who can we believe? ;)
Seriously, though, it's been good talking to Allen in your office - good follow-up without being pushy about it. I think you guys are definitely on our short list once we make the decision to pull the trigger on our first property.
- Modesto, CA · Member since 2016 · 38 posts · 26 votes10y
Originally posted by @Chris Clothier:
And I don't understand this, either. Presuming that you are planning to buy multiple properties over time, eventually investing hundreds of thousands of dollars through a given turnkey company, why would you not spend a few hundred dollars to hop on a plane to check out both the property and their operation for yourself? After you've bought a house or two and know that the turnkey operator is legit, it would probably be ok to buy sight unseen (while still doing normal due diligence), but for the first one? I'm absolutely going to be on a plane to check things out in person.
- Investor · Moseley, VA · Member since 2016 · 49 posts · 28 votes10y
@Andrew Hargreave First off, welcome to BP - we 'late bloomers' need all the demographic support we can get.
Secondly, I read RDPD years ago and it also got me motivated to find my mentor - which has proven fairly successful. I love the ideas in the book too and will be passing it on to my kids, with some caveats, when they are ready.
HOWEVER, that being said you may want to limit your RDPD experience to the book and avoid the seminars - here's a BP thread on the topic worth reading:
https://www.biggerpockets.com/forums/79/topics/147553-free-rich-dad-seminar
Not trying to dampen your enthusiasm, but just think you might want to be aware as you move through this new world.
- Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes10y
Thanks....no plans to spend $ on seminars..gotta save it for investing :) I also believe spending money to join BP is a much better investment in my education than sitting in some hotel conference room listening to someone speak for a few hours. I have close to 30 browser tabs open to various blogs/forums/REI sites at the moment and am inhaling information that way. It's how I learn best.
I was looking into some of other RDPD books in his series and all the reviews led me to believe that the original is the best to get you started. I'm also reading the books available here on BP when I joined.
Thanks for the advice though! Much appreciated!
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Originally posted by @Alex Zuroff:
Originally posted by @Chris Clothier:
@Merritt Whitman @Dolores Waldron @Shane M.
... I have said dozens of times that you can take nothing on faith. Not even what I say
But Chris... If we can't believe you, who can we believe? ;)
Seriously, though, it's been good talking to Allen in your office - good follow-up without being pushy about it. I think you guys are definitely on our short list once we make the decision to pull the trigger on our first property.
Hey Alex,
I know it is tongue-in-cheek but the reality is, you should not take my word for it. You should never just trust a company based on hearing what you need to hear or even knowing that they have a good reputation. Investors cannot afford to take things on faith - they have to be diligent and set a standard for themselves.
The good thing about having a short list as well is that you get a good opportunity to really get a feel for what level of service and investment property you want as an investor. I applaud you for taking your time and not just jumping in with both feet...yes, even with our company! Best to you -
- Investor · San Diego, CA · Member since 2016 · 1 post · 0 votes10y
@Chris Clothier I'm in the process of reviewing properties with Marq of Memphis Invest. This is my first time completing a 1031 exchange to purchase a property and I have to say I've been very impressed with the time he and Taylor have taken to answer my questions. I will post in the BP community again once the transaction is complete on how my experience with Memphis Invest has been, but so far, I'm very pleased. Looking forward to doing business with you and your company.
- Rental Property Investor · SC · Member since 2015 · 12 posts · 10 votes10y
@Shane M. Thanks for the post... I didn't go as far as you to make the trip but thanks for sharing your feedback. I'm sorry you went all that way for a bad experience, but way better to know now!
If you're still looking for a turnkey company I've started conversations with Spartan Invest in Birmingham, AL. I haven't bought anything with them yet, but so far they've been super responsive, transparent, and thorough; I'm looking forward to working with them.
- Miami Lakes, FL · Member since 2015 · 133 posts · 83 votes10y
The same names seem to keep popping up as good TK candidates...
USAPortfolioRE for the Detroit area,
OhioCashFlow Toledo,
Memphis Invests,
Spartain Invest, Birmingham.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ken Badziak I can assure you among this list there are many many other quality TK companies.
- Miami Lakes, FL · Member since 2015 · 133 posts · 83 votes10y
Originally posted by @Jay Hinrichs:
@Ken Badziak I can assure you among this list there are many many other quality TK companies.
No doubt!
- Specialist · Piscataway, NJ · Member since 2016 · 65 posts · 25 votes10y
Many thanks to all the posters. I am currently in the market for a turnkey and know (and like) Clayton and Natalie Morris from their tech reporter days. Based on what I have read above Morris Invest is off the list.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes10y
I don't know anything about this company one way or another. I can say I have seen countless turnkey companies come on this board over many years and they have crashed and burned.
They tend to talk about how easy the cheap properties will be to manage and how profitable they will be. They sell a bunch of these properties to investors they have converted as believers. A few years go by and then the horror stories start happening. Some people complain about the companies and others who bought multiple houses and said for sure it would be great you never see them posting an update on this board years later to see what happened.
I believe in quality over velocity when running a business. If you put your own short term needs ahead of your customers or clients long term needs that is not the way to build a solid and lasting strong foundation business for many decades to come.
You want your customers and clients to win each time with their investments. Some of these TK companies try to shift blame on the investors buying them saying they were not managed properly or watched over correctly.
These sub 40k houses out of state think about this. If you have a really old house that a TK company buys for 10k and selling minus resales costs for 35k to 40k how have they put all new A/C and heating, water heater, electrical, roof,etc.?
I find many use the term "newly renovated" to mean new carpet and paint and a few door knobs and light fixtures. Investors do not need to have the "new shiny object syndrome" for a cheap price. Take a step back and really look at the area and the property objectively. Those higher returns you think you will get for cash flow will easily be wiped out by the constant turnover of low grade tenants who rarely pay consistently on rent. Additionally all the old expensive items needing to be replaced that the TK company did not do will wipe out years of cash flow.
You want to find the worst looking property in the best area and not the cheapest and best looking property in the worst area.
Some of my friends do own houses for investments BUT and this is a KEY they bought 4 to 5 years ago when they could pay cash for a 50k house in an A area to B at worst put 10k in and years later they property is worth 135,000 with 1,400 a month rent. At the time those properties were getting 900 a month rent. So they were 1.5 rent to purchase ratio all in for an A to B asset. These days long in the cycle to hit those metrics and price these TK companies are selling the trash in the junky areas.
I have seen this with large MF buildings as well. I did those 4 to 5 years ago and you could get 9 caps in A to B areas. The war zones were selling for 15 caps. Now these sellers are trying to sell absolute trash in areas I will never go to for an 8 cap which when you really underwrite the property is a 7. These people are going to lose money in the long run and really take a loss. They do not understand the area, the demographic and culture to know how the property will operate long term and the issues you will have. They are just drinking the short term cool aid these sellers are pushing and hoping the cycle takes them into nirvana for the future. That is not investing it is speculating and doing so dangerously at that.
What you want is the business selling you a product to be there for the relationship long term and to help you if any issues arise. No property is perfect and things will pop up even with a more quality property. Whoever you go with look for commitment, honesty, integrity, and the long term picture. I go to bed every night knowing I have done right by the people I work with. I believe that is worth more than any deal velocity or bank account number accolade. I see it all the time in commercial real estate. People just spinning a deal to make a quick buck only thinking of themselves. I run a different ship.
- Real Estate Agent · Houma, LA · Member since 2016 · 240 posts · 115 votes10y
@Joel Owens, They don't mess with air conditioning...and if I understood correctly from the podcast, allowing tenants to put in window units if they want A/C. I have been listening to the podcasts for the last couple of months and the thing that gets me is when analyzing a property, they tell people to use 40% for repairs & expenses. And not to worry about cash flow unless it is under $1, because you are building wealth. CAPEX doesn't need to be worried about because they rehab the homes and you shouldn't need to do anything to them for a while.
All of these things raise my "Salesman Alert"...I may be a little overly conservative when analyzing a deal, but I want to make sure it pays for itself and brings in a little extra. The principles advised feel like you are being set up for a ride on the sucker train.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes10y
"CAPEX doesn't need to be worried about because they rehab the homes and you shouldn't need to do anything to them for a while."
That's great. Ask them to DEFINE what they mean by rehab with a list of repairs followed by pictures documenting each stage of the process for the property you are considering buying from start to finish. The good TK companies can back up their claims with proof.
If they are spinning houses fast to people with cash some TK companies take the path to least resistance and sell,sell,sell the product. It's about slamming a rehab with minimal quality at that point for velocity's sake.
Again I know nothing of this company one way or the other. When Chris Clothier first came on here from Memphis Invest he had to field tons of questions. Over time it's amazing how big his business has become. From what other investors are saying over the years it seems they do a good job.
Some other TK's just want to sell the product and not offer the support. That's fine as long as a TK company discloses that upfront and doesn't present one thing and do another. Many like to use the 40% expense. I personally like 50% as the number. The less expense estimate the larger a return margin a TK company can show so it is easy for them to sell it.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Clint Galliano:
@Joel Owens, They don't mess with air conditioning...and if I understood correctly from the podcast, allowing tenants to put in window units if they want A/C. I have been listening to the podcasts for the last couple of months and the thing that gets me is when analyzing a property, they tell people to use 40% for repairs & expenses. And not to worry about cash flow unless it is under $1, because you are building wealth. CAPEX doesn't need to be worried about because they rehab the homes and you shouldn't need to do anything to them for a while.
All of these things raise my "Salesman Alert"...I may be a little overly conservative when analyzing a deal, but I want to make sure it pays for itself and brings in a little extra. The principles advised feel like you are being set up for a ride on the sucker train.
OH man this just gets better... total wipe out coming... .window units are a dead give away for hood rat properties..
- Real Estate Agent · Houma, LA · Member since 2016 · 240 posts · 115 votes10y
This was another thing that bothered me when listening to the podcast...being from South Louisiana, something without AC is a horrible experience. Window units are OK, but it takes multiple units, depending on the size of the property, in addition to more components to break.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Clint Galliano and in many jurisdictions especially in the south Central air is mandatory for section 8.
your better tenants in these areas simply will not rent a home that does not have central heat and air.. your just going to get the bottom of the barrel tenants... although one person posted above that there are many doctors renting these homes from Morris investors.. I bought rolled out of my chair laughing at that one.. :)
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